Are you looking to purchase a new truck for your business? Unless you have lots of money saved up, chances are you’ll need some form of financial help. Commercial truck financing allows you to borrow money to finance a new truck for your business using the truck as collateral.
There are two main types of commercial trucks you can finance:
- Vocational trucks are usually four-wheeler trucks used for a single purpose. Tow trucks and delivery trucks, for example, fall under this category.
- Semi-trailer trucks are much larger trucks with one or more trailers attached to transport cargo over long hauls.
Truck Loans: What you need to apply
Since truck lenders use the truck you are purchasing as collateral for your loan, they’re just as interested in the truck you are buying as they are in your potential as a borrower. Therefore, before applying for any truck loan, make sure to prepare:
Most lenders will require you to have insurance on the truck before they agree to finance it since truck repairs can be extremely costly. Lenders want to know that an accident won’t put you in debt and at risk of defaulting on your financing agreement.
It’s important to remember that truck loans are a secured form of finance, so the lender can repossess the vehicle if you do not pay your commercial truck loan on time.
Semi Truck Financing
Financing a semi-truck is a bit different from financing a vocational commercial truck. This is because these vehicles carry heavy loads over long distances, so they have different risk characteristics.
With semi truck financing, the truck is still used as collateral, but you’ll also need a downpayment (5% – 25%). Some other requirements include:
What do I need to get approved for semi truck financing?
Your business will need to have been in operation for at least two years, with consistent revenue to get approved for semi-truck financing. Here are some of the documents the lender may ask you for:
Where to get Semi Truck Loans
Most commercial trucking industries are risky, which is why only certain types of lenders are willing to provide this type of financing, namely:
- Large banks – National banks can afford to offer commercial truck finance to highly qualified businesses for very low-interest rates. However, to get approved by a bank, you’ll need to go through a grueling application process – not to mention have a stellar credit record.
- Specialized commercial truck financing companies – Some lenders specialize in commercial truck financing, so they can help you get the best deals and provide you with valuable advice. These lenders typically offer financing as a form of ‘equipment loan,’ which means the vehicle is used as collateral for the finance.
Banks have lower interest rates. If you’re very well qualified and have an established relationship with your bank, truck financing through your bank will be cheaper.
However, if your credit isn’t excellent, specialized lenders might still approve you if they can secure the vehicle as collateral. In both cases, if you default on the financing agreement, the lender will be able to repossess the vehicle to recover the debt you owe.
Semi-truck rates and terms
The semi-truck financing rates you’ll be offered will vary greatly depending on your circumstances. Established truck operators with excellent credit and proven profitability can secure prices as low as 3%. In comparison, those with weaker credit may be offered rates as high as 20%. Mid-range borrowers fall somewhere between 7% – 10%. New operators with very bad credit and no assets aren’t likely to be approved for semi truck financing.
The rate you’re offered will also depend on the loan term, which is based on the lifespan of the semi truck you’re purchasing. Always make sure that the loan payments will be affordable compared to your expected revenue for that term.
Finance for Truck Leasing
You may decide that leasing a truck will be more beneficial to your company than making a truck purchase. Some pros of leasing over purchasing are that there is a lower upfront cost, the commitment is shorter, there will be generally less maintenance, and you can upgrade more easily. These benefits are often very enticing to business owners, and they can still get financing for truck leasing or semi-truck leasing. Most lenders can offer financing for commercial vehicle leasing.
Business auto loan
A small business needs dependable transportation to get jobs done, whether it’s to deliver products to customers or to get between work locations. A business auto loan can help you get your business car on the street. Business vehicle loans are easy to get, and some come with up to 100% financing. Most financing companies will use your business vehicle as the collateral itself, and they offer loan terms of up to 7 years.
Truck Loan FAQs
Commercial truck financing companies work with many customers who have bad credit. While the options for poor credit may be more expensive, they do exist.
However, semi-truck financing for bad credit might have some additional requirements, such as:
Higher interest rate – Semi-truck financing rates range from 5% to 35%. As a subprime borrower, you can expect an interest rate on the higher end of that range.
Larger down payment – You may be required to lay out a larger down payment (25% to 50%) to help lessen the lender’s risk.
Shorter loan term – If you don’t have a good record of repaying credit in the long term, lenders may insist that you take a shorter-term loan rather than a long term loan.
Ultimately, all commercial truck financing with bad credit will cost you more. You might consider taking some time to improve your credit (by paying off any existing debts, for example), as this might save you thousands of dollars in the long run.
Obtaining financing for a truck will give you a chance to rebuild your credit through regular and consistent payments, making it easier for you to access the funding in the future if you need it.
If your credit history is very poor and you’re looking for guaranteed semi truck financing, you can lease a truck instead. Semi lease purchases usually have no credit check and require no money down, but can turn out more expensive in the long run. It’s important to remember that you will not own the truck for the duration of the leasing agreement. Moreover, any default on the contract means that the leasing company can stop your business from using the truck.
Aside from leasing, other kinds of business funding without a credit check are hard to find. You should be especially wary of any no credit check commercial vehicle loans. Some reputable businesses may forgo a credit check if your business qualifies in other ways (such as high revenue or good previous history with the lender). However, most no credit check semi truck lenders will take advantage of desperate people with poor credit, and charge them dangerously high interest rates.
Yes. While you can get commercial truck financing with no money down, you will need to have an excellent credit score. Moreover, commercial truck financing with a 0% down payment is much more expensive as you are financing 100% of the truck’s value, not just a fraction.
Another option is semi-truck leasing with 0 money down lease, also called an operating lease. Leasing allows you to use the truck without actually owning it. This is a good truck financing option for borrowers with bad credit who cannot afford to put money down. An operating lease can help you start working while slowly repairing your credit. In turn, better credit will allow you to access more affordable financing options in the future.
If you’re looking to start a trucking business, a startup business loan may be the right type of financing for you. As a startup, your business doesn’t yet have the documentation it would need (such as business tax returns and bank statements) to back up a regular financing application. Instead, you’ll need to include a detailed business plan and income projections in your application. You may also need to prove that you have the necessary experience to start a trucking business of your own.
If you have a good credit score, you might consider applying for an SBA loan. These government-backed loans have low interest rates and flexible repayment terms, which can make the grueling application process worthwhile. You can also try applying for a personal loan, which only requires you to have a good credit score, without any business documentation.
Yes. You can use truck financing for several reasons besides purchasing a new truck, such as:
Truck repair financing
Permits and licenses
Buying out of a lease purchase
A truck finance calculator or a semi truck loan calculator can help you figure out your monthly truck loan repayments. Knowing your monthly repayments before you take out the loan will help you assess whether or not you can afford it. Some truck loan payment calculators will also provide you with current loan rates from different companies which can be useful when comparing prices.
Who is mCashAdvance?
MCashAdvance is a merchant cash advance direct funder based in New York. We provide fast cash injections to help American businesses flourish. If you process your sales through card transactions, you can get approved for financing with us instead of using truck financing.
- No collateral – You won’t need to use the truck or semi that you purchase as collateral for the finance.
- Less paperwork – We don’t require any information about the truck you want to buy. We only care about how your business is performing
- No downpayment – We will not ask you to lay down any money in advance.
Our MCA funding is not the cheapest, but it always comes with complete transparency and integrity. Apply now with mCashAdvance and get an instant pre-qualification decision! If approved, we can advance up to $500,000 within 24 hours!
Get a Cash Advance to Finance a New Truck!