Commercial Truck Finance: A Complete Guide

Published September 17, 2020 by WC Team

Commercial Truck Finance: A Complete Guide

Commercial vehicle loans usually mean loans given to individuals or organizations. They are given for the purchase of any vehicle for business purposes or commercial use. These are usually availed by people involved in the transportation industry. 

Commercial truck finance is a way in which truck owners can buy or repair trucks. This is strictly for commercial use, for example, to make certain deliveries. It often becomes difficult for small business operators to manage trucking expenses. So commercial truck finance is a way to bear the cost and successfully run their business.

How does Commercial Truck Finance work?

With the growing demand for trucks in the industry, commercial truck finance has also gained popularity. But how does it work? First and foremost, it is important to understand that a personal vehicle loan is very different from commercial truck finance.

The difference is both in terms and cost and also the place or source of funding. The lender will hold the title of your vehicle (truck) till you pay all the debt. The truck, in this sense, works as collateral against the loan. In case you fail to pay your debts, the truck would be seized. 

Commercial truck finance can be useful in a lot of cases. This includes the following three purposes. 

  • If you are looking to buy a new truck or an old truck. 
  • Suppose you want to lease a new or used truck. This is one of the most availed options.
  • Suppose you are looking to get your truck repaired or upgraded. In most cases, it becomes difficult for business owners to bear the cost of repairs. This type of financing comes in very handy in such situations. 

Where to get Commercial Truck Finance from?

There is now an idea in front of you as to how truck financing works. Let’s now take a look as to where this can be availed. There are a lot of options available when it comes to this type of financing. Commercial truck finance can be availed through the following methods. 

The banks

This option can be used to finance a single truck or even a fleet. There are not a lot of traditional banks that provide commercial truck finance. It is usually considered a risky option as well as expensive. 

There are, however, a lot of national banks that have great options for commercial truck financing. The procedure involved in this is a cumbersome one. There are also a lot of requirements that you need to fulfill to be eligible for the loan.

 You will generally be required to have a good credit score for this. Certain banks also require you to do down payments. It is a difficult option to explore, but you can always give it a shot. 

Online Lenders 

While the traditional banks have a long process, online lenders might come in like a fresh breeze. They generally do not require a lot of qualifications. The application process is easier, and they have faster funding times.

One thing you should keep in mind is that their rates are usually higher than traditional banks. They also provide you with shorter terms. They also don’t focus a lot on the annual revenue. 

In case to find the right lender for yourself, you must check them thoroughly. This is a great option in case you fail to qualify for the traditional bank loan. 

Truck Financing Companies

There are various online financing companies only focusing on trucks and other heavy vehicles. It is a convenient option to consider because they have great knowledge of the industry. 

This is a faster process as compared to other options. They are also likely to charge lower interest rates. They also don’t require a large down payment. They will help you access the right amount of your truck to help you understand the financing costs.

It is very important to check the lender thoroughly. Go through their reviews and figure out their reliability and credibility. This will protect you from unnecessary fraud and give you the best value for your vehicle.

Some points to consider while choosing your finance 

  • No payment before approval should be made. If a lender asks you to make any payment before the approval, consider that as a red flag. You should only consider making a payment after your financing has been approved. 
  • You should always check the reliability of the lender. Read the reviews and then decide. Choosing the wrong lender might put you at a loss. 
  • The lender should allow you to pay off your debt early. If you are willing to pay the debts early, you should not be charged with prepayment penalties. Clear this out before finalizing your finance company.
  • You should be able to purchase your leased truck at the end just in case you want to. Always check the sales tax, which is charged on your monthly payments. You should also consider checking the sale price of the vehicle.

What are the basic requirements?

Having figured out the purpose and source of financing, let's look at the basic requirements. Like any other financing, commercial truck financing also requires some basic qualifications. Here is a checklist of what you should keep in mind.

Credit score 

It is always beneficial to have a good credit score. A credit score is taken into consideration when you are approaching a traditional bank. The online lenders and financing companies don’t usually stress a good credit score. 

In every case, it is always beneficial to have a maintained credit score. 

Your time in the industry or business

A lender will always look at your experience in the business. If you are a new business operator, the lender might be a little reluctant. Although being a sole proprietor will make you appear confident and less risky in front of the lender.

The condition of your vehicle

Your vehicle will work as collateral against the loan. The lender will check the condition of your vehicle and the quality of your truck. 

Documents that you should keep handy 

  • Financial statements (at least 3 years)
  • Tax returns
  • Your commercial driver’s license 
  • Insurance proof of the truck

Endnotes  

The industry of commercial trucks is increasing. It is not always possible for business owners to handle all the expenses. Commercial truck finance helps even the small business owners to lease or buy a truck for commercial purposes. They can choose from a variety of sources, depending on their needs. It is always a great way to manage both business and finances.

Are you a business owner? Apply for financing. Start Now.

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