A new business in the transport industry can be difficult to establish without the right expertise. Expanding your operations as a small business is equally challenging if you don’t have an adequate delivery system. For all such purposes, trucking business loans are the optimum solution.
Your truck finance for new business plan will require extensive funding. If you are thinking about food truck business financial plans or other creative ventures, loans are always suitable. Unlike a run-of-the-mill car loan, truck financing requires steady funding in larger amounts. This makes the process more complex, as well.
Keep in mind that you will have to acquire enough resources to buy, repair, and manage your semi-trucks. The first step is thus to determine how many and what kind of trucks you are interested in. With this settled upon, you can begin understanding the application procedure as follows.
What to Expect from Business Truck Financing?
You will not immediately possess the truck in your name if you opt for a loan. Trucking business loans are set up to reduce the risks of lenders while benefitting borrowers. This means that the vehicle you purchase acts as collateral for the loan.
Once the loan is fully paid off, borrowers can acquire the truck under their name. This feature of the loan is like the process of car loans. However, there will be no interruption in your truck finance new business plan since you can keep using the trucks.
A loan is the right choice for those who lack the funds for investing in a vehicle right away. Usually, commercial truck loans can be paid off during their 5-year term.
During these 5 years, you will be charged interest depending on the amount borrowed. Additionally, your credit scores may influence the rate of interest, as well. A minimum credit score of 600, without any delinquencies, is preferred. This will provide you with a fixed rate of 5% or 6% interest.
In case personal or business finances are not considered satisfactory, a guarantee from the business owner might be required.
Where to Look for Financing?
Trucking business loans can be availed of in traditional banks for the lowest interest rates. Regional and community banks are good choices for saving on overall expenditure. However, the process of approval and application is long-drawn and cumbersome.
An alternative to conventional bank loans is a lending company online. Alternate lenders will offer you loans for differing amounts. You are likely to qualify for loans much faster with such lenders. This is advantageous for new businesses looking to advance rapidly.
However, while online lenders require less documentation, their rates are higher. They require higher down payments, and their interest rates are greater as well.
Lending Companies and Red Flags
If you choose to opt for an alternate lending company, you will be paying much more overall. As a result, finding a reputed and established company is important for financial safety. You should always look for online reviews for the company you want to loan from.
Not only should lenders know the trucking loan industry, but also be trustworthy. This means that the loan agreement they draw up should be free of any loopholes. If you feel suspicious of certain clauses, it is recommended that you ask a lawyer to look over it. Do not sign the contracts until you feel entirely comfortable with every detail.
To ensure hassle-free borrowing, lookout for a few red flags. Firstly, no lender should ask for cash upfront or any extra payments until the loan is approved. Trucking business loans should also come with the feature of early payoff to avoid prepayment penalties later.
In case you choose to purchase on a lease, ensure that the sales tax is not charged twice. This means that the final amount for payment and monthly payments should be adjusted by the end.
What You Need to Qualify?
For your truck finance for new business plan to be approved, you need to provide certain financial information. Lenders will want to be assured of your financial soundness before they hand the loan over to you.
Having experience in the trucking industry or similar fields can be beneficial. Lenders are more likely to approve your loan if they see how established you are. This makes it easier for limited liability companies and corporations to get approval for loans. On the other hand, sole proprietorships might not do so well.
Credit scores are the primary determinant factor in many cases of borrowing. A decent credit record ensures higher chances of approval for trucking business loans. Those with credit scores of 600 or more are best placed as a result.
In case you do not have high enough credit scores, lenders might require other information. They may even ask that the loan contract be cosigned for security purposes.
The personal financial history of the business owner will be important as well. Any pending payments, overdue taxes, child support payments, or other liabilities will be noted. Moreover, failure to pay the down payment might influence lenders to withhold the loan.
The maintenance of the truck is a crucial factor in the loan process. This is because the vehicle is held as collateral for the loan. Lenders will want to ensure their security by only financing vehicles in good conditions.
It is in your favor to ensure the truck you purchase is either new or a quality secondhand vehicle. The fewer the miles it has, the better chances for your loan to be approved.
Process for Application
Much like other business financing processes, trucking business loans have a specific application procedure. Lenders are likely to ask for the following information and documents:
- Financial statements of business owners
- The vehicle’s insurance papers
- Tax returns
- 3 years of financial statements for the commercial venture
- Commercial driver’s license
If you are aware of the details of borrowing, your new trucking business will remain secure. Whichever avenue you choose, always ensure your safety by checking the clauses of loan agreements. Get started right away by applying for loans and planning for the expansion of the business.