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Types of Trucking Companies Loans

On the hunt for a low-rate and flexible term small business commercial trucking loan? Use our guide to find the best equipment lender and unlock the best terms.

Liara Cohen
Liara Cohen
September 28, 2020

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Are you looking for trucking companies loans to establish a new business or grow your existing one? Whether you want to invest in new equipment, improve infrastructure, or hire new staff, you need money. This can take a toll on your business bank account, which can lead to a financial crisis. 

You can get access to the money you need without having to clean out your bank account completely. For this, it is wise to consider one of the best financial options in the form of trucking companies loans. Business loans will help you with the money you need to grow your business.

There are different types of trucking companies loans that will aid you financially in developing your business.

Small Business Administration Loans (SBA)

Like the name suggests, Small Business Administration Loans are for small businesses that do not qualify for the standard business loans. If you are a small trucking company, then you can qualify for the SBA loans. One of the most popular programs is the SBA 7(a) loan, which lets borrowers receive up to $5 million.

The amount can be used for purchasing machinery and equipment, truck purchases, or any other business purposes. For a small trucking company, an SBA loan is the perfect option. To be eligible for this loan, the borrower should have at least a credit score of 680.

The credit report should not have any past defaults, bankruptcies, or foreclosures. It is also necessary for the owner to have the United States based for-profit company. The owner will have to follow the guidelines established for small businesses. The guidelines are for the annual revenues, employee numbers, and the company’s net worth.

Small Business Administration Loans are not just for new business establishments but also established businesses as well. This loan is perfect for any establishment that has exhausted all their other financial options. The borrower should have a personal guarantee to be eligible for the loan.

Equipment Loans

Equipment Loans are another one of the important trucking companies loans used to purchase several types of equipment. In the trucking industry, the equipment loan is used to purchase used or new trucks, physical assets, or even a trailer. The loan helps you in breaking down the cost of any expensive equipment you need for your business. 

You can make small payments to pay for this equipment and manage them according to your budget. Equipment loans can give interest rates as low as 5% for people who have a good credit score. On the other hand, people who have a low credit score may have to pay an interest rate of 24% or more.

Depending on your credit score, the down payment and financing percentage may also vary. The repayment period for the equipment loans is generally 3 to 7 years. Even if you get complete financing with zero down payment, it is better to pay some down payment percentage. This decreases the debt amount significantly and will help you to repay the loan faster. 

One of the best things about equipment loans is that there is no collateral required. If you are purchasing a truck with the loan amount, the truck will serve as the collateral.

Medium-Term Installment Loan

Another type of trucking companies loans is the medium-term installment loans. The loan is used for different kinds of business purposes. Once the loan is sanctioned, the borrower can repay in the form of considerably low monthly payments. The repayment period for this loan is around the range of 1 to 5 years. 

You can use the loan to gain for the working capital or also pay for equipment. The loan can also be used for acquisitions, business expansions, and to refinance any existing debt. The loan term amount will vary depending on the credit score and lender.

Borrowers who have a high credit score may get around a 6% rate, and low credit scores can get about 30%. The borrower will have to pay an origination fee and application fee for the finalization of the loan. You may have to pay collateral depending on the loan amount and credit score.

People with a credit score of a minimum of 600 will be able to qualify for the medium-term installment loan. The borrower also needs to have minimum annual revenue along with their credit score. This amount will vary according to the terms of the lender and the amount that you are borrowing.

Short-Term Business Loans

Short-term business loans are like mid-term installment loans, the only difference being the repayment time. The repayment period for short-term business loans are variable but never exceed one year. However, short-term business loans are very expensive and should only be applied when very necessary.

Due to the fast funding and short repayment period, short-term business loans are used when an emergency arises. Business-owners, who are relatively new to the business and have low credit scores, both personal and business, can be eligible to apply for a short-term business loan.

Most of the short-term business loans have a factor rate, which will determine the total amount that has to be paid on loan. The fees and terms for the loan will vary depending on the creditworthiness of the borrower. Like any other loan, the ones with higher credit scores can get low rates, and the borrowers with a low credit score will get a high rate of up to 80%.

The qualification for short-term business loans can be for borrowers with a low credit score of 500. Based on your requirement, the lender will sanction an amount, rate, and repayment period. You will need a blanket lien or personal guarantee to be accepted for the loan.

Summing Up

You can get flexible interest rates and repayment terms on each of the loans depending on your need. Businesses or owners who have low credit scores can also be eligible for several trucking companies loans. You will need to show your business plan to get the loan accepted in addition to a good credit score.

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