Are you a newcomer to the transportation business? Or have you started a brand new business involving the use of trucks? Truck finance is required for both old as well as new players. Read on to find out what is new business truck finance.
Truck finance involves buyers to procure a loan from a bank, non-bank financial companies (NBFCs), or other institutions. The amount usually involves a large part of the truck cost. Buyers have to repay this value in installments over a given time.
Truck finance lenders usually require truck-owners to provide certain documents.
New Business Truck Finance—How it Works?
New businesses may not have a history of good credit scores along with financial statements. Such things are necessary for procuring truck finance. Here’s a list of prerequisites for financing a new truck.
- The business must be in existence for 2 or more years
- You must provide 2 years of income tax returns along with bank statements of the last 6 months
- The business must have a good credit score (580-650)
- The truck that you want to finance must be in good working condition
Some financial providers are flexible for new businesses. They may render financing to businesses even with low credit scores, given leverage. Usually, the truck you purchase acts as a collateral.
Once you meet the eligibility criteria, you must ascertain the type of new business truck finance you want.
Types of Truck Finance
New Truck Finance: Business can obtain semi or full funding while purchasing a brand new truck.
Old Truck Finance: This type of finance is issued to businesses for funding their purchase of a used truck. They can fund a vehicle that is up to 15 years old. In this case, the funding may be received for up to 90% of the value.
Truck Refinancing: Businesses can choose to procure loans on a vehicle that is already financed. In this case, the existing loan is extended if certain eligibility conditions are met.
What are the Documents Required for New Business Truck Finance?
The basic requirements include 2 passport-sized photographs of the procurer, a filled-out application form, processing fee.
Income Proof
- Last 6 months bank statement
- Income Tax Return statement of the last 2 years
- Audit financial statements
- Commercial Driving License
- Owner’s personal financial statements
KYC Documents
- ID proof such as passport, voter’s ID, etc.
- Proof of Address such as utility bills (phone, water, electricity), rent agreement, etc.
Truck Documents
- Invoice
- Insurance
- RC
- Photograph of the truck
Others
- Existing vehicles proof (if any)
- Proprietorship Declaration
- List of fleet
- Loan repayment history (if any)
- Trade reference
Once you have your documents ready, start the search for a financial service. When looking to obtain a loan for your truck, you must do the research for the best service providers available. There are certain factors that you need to consider to obtain truck finance for your new business.
Features of a Good Truck Finance Provider?
Competitive Rates: Before making the final decision of procuring load, you must do profound market research. You must choose the financial provider who offers the lowest interest rates to new businesses.
Easy Procurement: Getting truck finance is usually an easy procedure. At an expert financial institution, the requirements of documents and processing the application will be quick and simple.
Fast Approvals: Some institutions offer same day approvals or within 24 hours. Make sure that the services you choose offer this benefit.
Tailored Finance Options: Businesses have varying needs according to their work. Some may need to finance one truck while others may want loans for a fleet. Moreover, all businesses do not have a strong financial background. Your truck finance provider must customize your options.
Which Truck Finance Services Should You Avoid?
While there are features you should look for while choosing new business truck finance providers, you should avoid some. New businesses may not have the experience in dealing with cheats. Here’s what you need to know.
Upfront Money: Businesses do not need to make any payment before the approval of their loan application. If lenders ask you for application fees or down payment before your process starts, consider reporting them.
Early Payment Penalties: Some banks and other financial institutions penalize borrowers if they repay their loans before their tenure ends. You must have the option of prepaying your debts in case you suffer a loss.
Extra Interest: Some lenders may charge new borrowers extra-high interest. This is why you must do your homework before visiting a finance provider.
Process of Truck Finance
Choose the Financial Provider: From banks to NBFCs and trade unions, you have several options to procure funds. Refer to the ‘features of a good truck finance provider’ while choosing the best services for your business.
Check the Eligibility Requirements: The next step while procuring truck finance is checking if you are eligible for the same. If you meet the requirements laid out by your chosen financial service, you can proceed to apply for the loan.
Fill the Application Form: Fix an appointment with the services or fill the online application form. You must make sure to read all the terms and conditions of the financial institution.
Provide the Documents: The finance provider will go through your eligibility criteria and application. Once you receive their approval, you will be asked to submit the required documents, such as proof of ID, address, vehicle-related papers, etc.
Receive the Fund: After you submit the documents required and sign the loan agreement, your funds will be processed within 3-5 business days. Viola! You can purchase your semi-financed truck.
Note: You will have to make periodical installments as mentioned in the agreement. The tenure may usually last up to 5 to 7 years, depending upon the institution.
Benefits of Getting a New Business Truck Finance
- Buy a truck without having to pay the entire cost at once
- Businesses may get up to 90% funding from financial services
- Customized solutions for your truck financing needs
- Repayment tenure of up to 5 to 7 years
- Get finance even if you want to buy an old truck
- Trouble-free process, with basic documentation requirements
Final Words
Whether you want to purchase a new truck or a fleet, getting it financed is always a brilliant option. New businesses may not have enough funds since they may have invested most of it. Procuring truck finance prevents you from having any financial burden.
In the case of transport businesses, the regular addition of trucks is highly essential. Moreover, controlling costs and managing finance is downright crucial. However, while obtaining finance, you must double-check the finance services.
By obtaining truck finance, the new business can build credit and also save money.
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