What You Need To Know About Financing For Commercial Trucks

Published September 14, 2020 by WC Team

Delivery and transport are important for the establishment of any successful business. If you are looking to expand, knowing about financing for commercial trucks is the first step. This will include everything from purchase, management, and repair of your semi-trucks.

Although the main procedure is the same, financing for commercial trucks is more complex than investing in personal vehicles. You need to also consider the range and number of trucks you need for your business. 

To help you avail guaranteed commercial truck financing, we have made a comprehensive list of everything you need to know. 

What Is Financing For Commercial Trucks? 

Financing for commercial trucks requires business owners to list their trucks as collaterals in the loan. Lenders do this to reduce the risk of losing money in case of faulty payments. 

This means that the lender will hold the title of your truck until the loan is paid. This is similar to car loans, and the vehicle will come under your full possession after clearing the debt. 

Commercial truck loans generally have a term of 5 years. Interest rates can differ from lender to lender. Your credit score will also influence rates. Business owners without delinquencies and a score of at least 600 can expect fixed interest rates of 5% or 6%.

The financial history of your business might also matter in some cases. Lenders can ask you to give a personal financial statement and guarantee when you apply for the loan.

Where To Look For Financing For Commercial Trucks?

You can find options for financing for commercial trucks at traditional banks, including regional and community banks. 

Alternate lenders also offer various commercial truck loans depending on the desired amount. The application and approval for online lenders are much quicker. Business owners looking to establish themselves rapidly can benefit from this feature. 

In addition, you are likely to be guaranteed commercial truck financing with online lenders because documentation requirements are less stringent. Keep in mind that the down payments required are higher and interest rates and greater. 

Commercial Truck Leases

Another option for financing for commercial trucks is the leasing of your vehicle. Leasing allows you to purchase the truck once the lease ends for whatever amount is left to be paid. 

This is different from loans since you get possession of the vehicle and when the loan period ends. Moreover, the monthly payments for leases are lower than those of loans. Nonetheless, there may be embedded interest rates in the payments for leases. This can increase your final expenditure.

Precautions To Follow 

The best interest rates can be found through traditional banks. However, the application process is extremely lengthy. In case you pick alternate lending companies for financing for commercial trucks, be sure that they are reputable. 

Alternate lenders will always have higher interest rates. To make sure you get the best possible deal, ensure that a lender has industry knowledge. Ideally, an online lender should also have made a name for themselves in the field of commercial truck financing. 

An established lender should have favorable reviews on multiple platforms. Additionally, your loan agreement with them should not have any suspicious clauses. 

Once you clear all the contract points, don’t hesitate to ask a lawyer for advice before signing. This can save you future hassles in case the contract is shady, and the company is unreliable.

Alternative Lenders And Red Flags To Avoid 

A few things should be kept in mind for your financial safety. 

Firstly, lenders should never ask for cash upfront. This applies to application fees as well. Payments should not be required until the loan is completely approved. 

Financing for commercial trucks should also come with an option of early payoff. This means that you should be able to pay your debt without incurring a prepayment penalty. Early payoffs might be required in case you need to trade in the truck or face insurance loss. 

If you opt for leasing, your sales tax should not be doubly charged. Check that your monthly payments and purchase price have adjusted the sales tax accordingly. 

Requirements For Commercial Truck Financing 

Financing for commercial trucks requires you to show your financial history to the lender. This can include a few aspects.

Industry Experience

As a business, you are more likely to get a loan if you have experience in the industry. Since new businesses are more likely to mismanage funds, lenders trust experienced business owners.  If you are a corporation or limited liability company, a lender has a higher chance of giving you a loan. On the other hand, sole proprietorships might face a disadvantage in this regard.

Keep in mind that commercial truck financing might require specific industry experience related to the field. 

Optimum Credit History 

Lenders will be concerned about your credit scores to start with. This means that good credit histories translate to higher chances of qualifying for loans. If you have a credit score exceeding 600, you are better situated as a borrower. However, lower credit scores might necessitate getting your loan cosigned. 

Your personal financial history might also be reviewed in this regard. Some problematic factors might be tax liens or pending child support payments. Being unable to pay the down payment in full will also be a red flag for lenders. 

Condition Of The Truck

The truck is to be used as collateral for the loan and has to be in the right condition. Lenders want to ensure their security with a good quality vehicle as collateral. If you purchase a new truck, you have better chances of qualifying. In case you purchase a used truck, the number of miles should not be more than 500,000. 

How To Apply 

Application for commercial truck financing is similar to other business financing processes. A lender will ask you to provide documents that ensure your financial history.

The required documentation will cover: 

  • Personal financial statements

  • 3 years of business financial statements 

  • Commercial driver’s license

  • Insurance proof for the truck

  • Tax returns

A documentation fee and small loan fee might be charged upon the signature of the loan. Your new semi-truck might cost you anywhere from $80,000 to $100,000 or more. If you buy a used semi-truck, you can expect it to range from $15,000 and beyond. 

Endnotes 

Financing for commercial trucks might seem overwhelming, but you can make the procedure much simpler with the right information. With the knowledge you now have, taking out a loan for your commercial truck should be less of a hassle. Always ensure that you review every detail of the loan, and you should be good to go.


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