Everything You Need To Know About Financing For Commercial Trucks

Published October 12, 2020 by WC Team

One way for businesses to profit is to have an effective transport and delivery system. For this purpose, business owners need to invest in semi-trucks. Not only does this include buying, but also repair, maintenance, and general expenditure.

Financing for commercial trucks is trickier than buying a personal vehicle since the expenses are much higher. Depending on your business's size, you will need to apply for an appropriate commercial truck loan. 

If you’re looking for guaranteed commercial truck financing, you can benefit from the research we have done here! 

How Does Financing For Commercial Trucks Work? 

To avail guaranteed commercial truck financing, business owners need to use their truck as collateral for loans. This is meant to decrease the risk posed to lenders. Much like any car loan, the lender will possess the title of the truck you buy. Once you pay off the debt, the vehicle will come under your ownership. 

Where Can You Find Financing For Commercial Trucks?

Traditional banks offer finance for commercial trucks. This includes regional and community banks as well. 

Other lending companies also offer commercial truck financing for varying amounts. This is a much faster lending process for business owners in a rush. The applications for alternate lending companies are online, and approvals are much more convenient. 

You are guaranteed commercial truck financing with such lenders because less documentation is required. However, a high down payment and higher interest are charged as well. 

What To Expect From Commercial Truck Loans?

These come with a term of around 5 years, and interest rates vary vastly. Your interest rates will depend on your credit as the borrower. A small business owner without any credit issues can expect fixed rates of 5% or 6%. That is, if you have no delinquencies and a minimum score of 600.

In some cases, a business might have to ensure a personal guarantee or financial statement during the application. This will depend on your financial history as a business venture. 

What Are Commercial Truck Leases?

Leasing is another option for business owners to look into regarding financing for commercial trucks. Leasing options permit you to buy the truck at the end of the lease for the remaining amount. 

Loans are different from leasing since you receive ownership of the truck as your loan period ends. Leases usually have lesser monthly payments as compared to loans. However, interest rates for leases are embedded parts of the payments and may hike up the overall expenditure. 

How To Go About Commercial Truck Financing? 

To begin with, traditional banks have the most favorable interest rates for financing for commercial trucks. However, businesses might want to avoid long-drawn application procedures. If you decide to go with alternative lending companies, you need to be more aware. 

Since online lenders have higher chargers, only go for those that are reliable. This means a lender has established itself in the field. Ensure that they are specifically experienced with commercial truck financing. 

Finding the right lender means someone who knows the industry. To ensure this, always look into reviews beforehand. Make sure the company is reputable and check out the loan agreement before finalizing it. 

Since loan agreements are binding contracts, soliciting legal advice is also helpful. It is best to clarify every little detail before you sign the contract. 

What To Avoid? 

Not every lender will be trustworthy, and you need to keep an eye out for the red flags. 

No lender should demand cash up front. Even if these are application fees, no payments should be required before the loan is approved. 

For guaranteed commercial truck financing, an option should exist for early payoff of the loan. This will allow you to discharge your debt early without prepayment penalties. This is important if you undergo complete insurance loss, or you need to trade the truck in. 

The sales tax should not be doubled in any case. If you are purchasing a truck on the lease, ensure that the sales tax is adjusted accordingly. Your monthly payments and the final price of the truck should only have the appropriate sales tax amount. 

What You Need For Commercial Truck Financing 

When you seek financing for commercial trucks, lenders may ask for details of your personal and commercial financial history.

Credit Scores

The first thing most lenders look for is your credit score. Just as you would expect for minor business loans, good credit scores mean easier borrowing. You are more likely to qualify for commercial truck loans if your credit score is 600 or higher. 

In case your credit score is lower, you may be required to get the loan contract cosigned. 

Since the credit score is important, you might face issues for a few reasons. Outstanding child support payments, tax liens, etc. are just a few things that might be a red flag for lenders. If you can’t pay the down payment, this will also reflect poorly on your financial soundness. 

Experience 

Your own experience in the field of business will make you a better candidate for loans. Lenders have a greater chance of going with seasoned business owners since the risks of losing money are decreased. Businesses that are corporations or limited liability companies stand a better chance than sole proprietor ventures. 

Given that you will apply for commercial truck financing, lenders might expect familiarity in that particular industry. 

Optimum Condition Of The Vehicle 

The condition of your vehicle will be important since it is used as collateral on loan. The quality needs to be suitable so that lenders don’t feel they will lose out. By financing a brand new truck, you increase your chances of getting a loan. If you go for a used truck, look for one with 350,000 to 500,000 miles at most. 

Application Process

Application procedures for commercial truck financing are not too different from general business financing. Usually, the lender will review all your financial history and ask for certain documentation. 

The documentation you might need to show includes: 

  • Tax returns

  • Financial statements for 3 years 

  • Personal financial statements

  • Commercial driver’s license

  • Insurance evidence for the vehicle

You can expect to pay a minimal loan fee, as well as a documentation fee once you sign. A new semi-truck can cost you from $80000 to more than $100000, while a used one starts from $15000.

Endnotes 

With this information, you should be all set to apply for a loan or lease for your new commercial truck. Be sure to check every detail with the greatest scrutiny. You can benefit from the right kind of loan as long as you know what to expect.


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