What is truck financing?
You will be able to see how expensive trucks are if you make or sell them. If you only sold on a cash basis, it would be nearly impossible to make meaningful revenue. You will be forced to sell on credit, just like other truck sellers.
Trucking companies, private sellers, and owner-operators may be willing to buy your trucks on credit terms. However, this can create a problem because accounts receivables can negatively impact your ability to keep a steady supply.
Due to the low cash flow and running costs, you’ll soon face a cash crunch. It is sensible to look into truck financing in such situations. This guide will discuss truck financing, its financing options, and why you should consider alternative lenders.
Truck financing is a type of equipment financing that can be used to finance the purchase, leasing, repair, maintenance, and/or replacement of heavy-duty trucks such as long haul trucks, box trucks, or dump trucks. Semi-truck loans are special business loans and have lower rates than most other loan options, such as credit cards or lines of credit. It makes sense financially to use financing to purchase trucks and take a slice of the $790 billion freight industry.
Conventional truck financing
These are the most familiar sources of financing. They often fall under two categories: semi-commercial vehicle financing companies and national banks.
a. National banks
These deals are often rejected by regional banks, so they are left to national banks that often offer truck loans as part of their financing programs. These banks often offer extended loan terms with the lowest annual percentage rates. These banks have strict requirements regarding credit scores, revenue, and business history. Truck financing is not possible for those with low incomes, poor credit histories, or new businesses.
b. Companies that provide semi- and commercial financing
These finance companies specialize in equipment loans. These companies have extensive knowledge of the trucking industry, so they can get the most value from any truck. These financing companies won’t tango with anyone who has a poor financial record, just like banks.
Alternatives to truck financing
For their higher interest rates, alternative lenders are often given a bad reputation. Alternative lenders will offer rates and terms that are comparable to conventional lenders if you have outstanding credit scores and credit histories. However, many alternative lenders will offer fleet financing at lower rates and shorter repayment terms.
Online lenders are able to approve loans and apply for credit in the fastest time possible. Alternative lenders can also fund business owners who fail to meet the requirements of traditional lenders. Alternative lenders will also fund business owners who are not eligible for conventional lenders. However, not all alternative lenders can be considered equal. National Truck Loans will have its own requirements, which are beneficial for all parties.
Commercial truck financing requirements
All lenders require the following information if you want to obtain financing for repairs, leasing, or refinancing.
To assess your loan-paying ability, will examine your personal creditworthiness. Some lenders will also examine your credit history, criminal record, and bankruptcy.
Your business financial history: examine your ability to repay the loan by asking you to produce tax returns, profit-and-loss statements, and balance sheets.
Vehicle details, make and model, vehicle identification (VIN), photos, and, if applicable, a condition report.
Lenders don’t need assurances that they will get their money back. All you need to prove is you are a low-risk borrower. Truck financing is available to anyone, even first-time buyers, who can show a solid business plan and strong industry knowledge. Alternative lenders have more flexible lending criteria, which makes them a great option for businesses with low credit scores and startups.
How to get semi-truck and commercial financing and how to qualify
Once you have met all requirements, traditional lenders can be applied to. Traditional lenders will take some time to evaluate your creditworthiness. They are not the best option for you if you have a financial emergency.
Alternative lenders are likely to take less time because they have all the financial information needed to assess your customers. This means that you can apply faster and more painlessly and will likely receive an approval within two days.
All you need to do to get funding from many alternative lenders is provide information about your business and personal finances. Lenders tend to favor newer trucks with less mileage because they are less likely to fail and last longer.
You will also need to prove that you have adequate insurance. Truck repairs can be expensive and could affect your ability to repay the loan. You may be required to provide the following information depending on your lender:
- Cargo coverage
- Insurance coverage
- Non-trucking liability
- Protection against physical damage
- Trailer interchange coverage
Leasing or financing a commercial truck?
Leasing or financing is the best option for small trucking companies. Truck financing is a little different because big trucks can travel thousands of miles before needing major repairs.
This means that the truck can continue to operate beyond the standard 5-7 year lease terms offered by most lenders. Truck financing is, therefore, a smart financial decision. These are the conditions that you need to apply for truck financing:
- Commercial truck loans are a great way to get cash when you’re short on cash. Leasing may be an option to ease cash flow pressures in such cases, as it has lower monthly and upfront payments. You may also spread the sales tax depending on where you’re registered.
- Start-ups: Trucking loans require a large down payment. This is something that you might not be able to afford. The Bureau of Labor Statistics (BLS), for example, notes that small businesses experience a 50% failure rate in the first five years. It is not a good idea to invest all of your money in a business that hasn’t been proven profitable.
- Longevity While some trucks have a long life span, like long haulers and long haulers trucks, not all trucks last that long. Delivery vans, for example, are subject to frequent wear and tear, which significantly reduces their shelf life.
Is it possible to get financing for semi trucks even if you have bad credit?
You can still get semi-truck financing even if your credit score is not good. Alternative lenders may be more willing to take on the risk than conventional lenders.
They understand that the truck is the collateral and not you. They are open to accepting poor credit histories, bankruptcies, and other financial difficulties. The lender will take title to your truck in exchange and will repossess it should you default on the monthly payments.
Although funding may be more costly, you can always ask for seasonal payments or extended payments.
How to select the best commercial truck loan
First, you need a lender that will not give preference to your credit score. This is the reason most traditional lenders fail. National Truck Loans Solution, for example, places importance on customers’ ability and willingness to pay. After approval of your invoice, they will assess and evaluate the customer’s ability to pay.
Next, consider the interest rates and payment terms. Look for a lender who offers lower rates and longer repayment terms. A lender that is familiar with the trucking industry is a good choice. A lender who is knowledgeable about the trucking industry will be able to identify all financial problems and help you get competitive rates and terms to ensure that you reap the maximum benefits of the deal.
Market trends will make it necessary to sell trucks on credit. This can seriously impact your cash flow. This will prevent you from stocking up and paying your financial obligations. Cash crunches will soon be a thing of the past with National Truck Loans’ net term management solution. For the assurance that National Truck Loans offers truck loan for bad credit, contact National Truck Loans today.