Trucking Business Loans: Costs, Terms & Requirements

Cody Cromwell
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Types of Trucking Business Loans for Working Capital

Working capital business loans are available for contractors who own and operate a trucking business. In addition to other uses, loans are available for trucking company vehicles, and are suited to variable expenses that are not budgeted well, like fuel and tire and maintenance replacement.

Because payments from trucking business income are usually slow to arrive and take some time to review, larger working capital loans are available with shorter payment terms and that can be repaid by rolling over payments. These loans are also attached to a vehicle and come with a guarantee against theft or damage.

Banks and other creditors are more likely to loan to individuals rather than companies, but companies can typically benefit from lower interest rates and better payback terms.

As with any business loan, you’ll need to demonstrate that you have sufficient assets to help you reach the target income. The lender will also want to know that you have legally registered the business in your state, and they will want to contact your state’s Secretary of State to confirm this.

If you set up your company as a sole owner, the individual-designated-account-number allowed by most lenders for your business will need to be registered.

Larger working capital loans come attached, or guaranteed, to a vehicle, so it’s important that you ensure the vehicle you select is suitable and will make you money.

How We Determined the Best Trucking Business Loans

The first step in getting a loan to start or expand your business is to figure out what loan amount you’ll need to get approved. To do that, we read hundreds of bank statements to determine average net income for trucking, as well as the average amount of monthly expenses. Then, we added those to a factor called the Debt to Income Ratio (DTI), which is the average amount of debt compared to the average income. Because banks want to make sure you can still meet your financial obligations when interest rates are high, they base your credit score entirely on your DTI, which is calculated with a formula that looks at your total monthly debt compared to your income.

This DTI does two things. First, it shows the bank how much of your available paycheck you have to pay your debt. Second, it shows the bank how much of your available paycheck you have for banks to loan you. If your debt to income ratio is high (too much debt), the bank will ask you to pay your credit card bills and other debt before giving you a loan. If your DTI is low (too little debt), the bank will usually lend you the full amount.

Short-term Business Loans

Small Business Line of Credit for Trucking Companies

If you’re thinking about expanding your business, you’ll want to look into acquiring a line of credit. And since you may not have the millions of dollars for a full bank loan, getting a line of credit that’s adequate to finance your long term business strategy is key. …

Unless you’re already established in a profitable business, it’s unlikely that you’ll be able to secure a bank loan. Credit card companies are also likely to turn you down. This is why a line of credit is a viable option for financing your expansion.

Let’s take a closer look at what you’ll need to do to secure a line of credit.

Identify the Business Needs

Before you can figure out which line of credit will work for you, it’s important to help you establish a business purpose. This will help you decide if the line of credit will help fulfill your requirements. When you have a better understanding of your business needs, you’ll be able to find the right business line of credit.

Get Set Up with Your Lender

SBA Owner-operator Startup Loans

Cost, Terms & Requirements

Startup Business Loans: SBA Loans for Business Owners’ Trucking

The Small Business Administration (SBA) has many programs for small business owners, but one of the most common is the Owner-operator Bank Loan. There are many people trying to break into the trucking business, but they have a problem getting the start-up capital to launch their company. The challenge for a driver trying to start their own trucking business can be the cost of entry into the industry.

There are a few ways that they could approach this problem, but the most common one is to ask family and friends for a loan. This is a great way to get a loan, but be prepared for them to ask for collateral if you finance a startup company. One of the things to consider when you finance a trucking business with an SBA owner-operator bank loan is the size of the operating territory they’ll be working.

Each state has a Federal Reserve Bank, which is run by the Federal Reserve System, a U.S. government agency. This bank controls the money and currency and serves as the main bank for the entire country. Most states have county-level banks that issue credit cards, which are used to pay back the loan.

Equipment Financing for Trucking Companies

There are two basic ways to purchase durable equipment for your trucking company. One is to take out a bank loan and the other is to get an equipment credit.

If your business has the capital to purchase equipment, then you can usually secure a bank loan much more quickly than applying for an equipment credit.

If you don’t have the capital, then taking out a bank loan may have to wait several months. However, if you have an equipment credit, then you can usually have the equipment shipped to you very quickly.

An equipment credit also reduces the amount of capital you need and can provide the flexibility to use investments from other sources of capital, such as from an investment group. But, the downside is that you will lose access to steady cash flow which makes meeting your fixed monthly expenses more difficult.

There are a few elements that are important for you to know before applying for an equipment credit.

First, your equipment credit has a set term. For example, a year to 90-91% of the purchase price.

Second, an equipment credit normally includes provisions that allow you to apply the trade-in value of the equipment if you want to sell it within a certain period of time. Most companies won’t want to sell the equipment within the first few years after purchase, so you could take a loss on the equipment if you sell it for less than you paid for it.

Business Credit Cards for Trucking Companies

An internet based credit card processing company can be used to automatically fund a business credit card account online. It allows you to maintain a credit card processing account online while giving you the flexibility to fund the account with cash, check, wire transfer and credit card. This allows you to make online payments and transactions directly to suppliers in your business as well as providing an additional advantage in terms of a business credit card account; lowered rates and better collateral for your account.

Improving Your Chances of Getting a Trucking Business Loan

Trucking companies that can get a loan can instantly grow, making them more profitable and giving them more chances of increasing their trucking fleet and growing their business. How do you go about trying to get a trucking business loan then? How do the banks that provide trucks business loans differ from traditional banks? While the same old rules apply, there are additional requirements and qualifications that you’ll have to meet.

Before we move on, be it trucking companies or other businesses, there are a few reasons why you might not be able to get a business loan. Apart from not being able to meet the loan’s qualifications, you might not have access to the kind of collateral that banks require. If you’re not sure what the problem is with your loan request, you should seek help from a professional and experienced business loan professional to guide you through the process. Your banker may also be able to offer you additional advice.

Separate Business and Personal Income

Improve Your Personal Credit Score

Your credit score plays a pivotal role in everything you do: purchasing a car, getting a loan, or renting an apartment. In order to buy a house or sign a lease, you need to have good credit.

While the average credit score ranges from 300-800 and it does factor in to your overall financial health, there are ways you can improve your credit score over time, with budgets that you can easily achieve.

Here are some methods for improving your credit score:

Pay your bills on-time

Making your payments on time is the most important thing to do if you want to improve your credit score. Make sure you’re following the instructions of your biller to the last minute and you’re not late with payments for longer than 45 days.

Avoid overdraft fees

If you’re having a hard time making ends meet, we don’t mean to alarm you, however the interest rate you’ll be charged at an overdraft account can be very steep. If you need to borrow, keep your account balance separate to ensure you’re not falling for ever higher overdraft fees.

Reduce your credit utilization

Apply When Revenue Is Trending Up

When the demand for freight services is growing, your trucking company is likely to be seeing a profit. This is good news for trucking companies because, generally speaking, owners and investors are happy. It means that your company is doing a good job, that you’re increasing your market share, and that your business is likely to thrive. This is a great time to take your business to the next level.

However, you’ll have to be sure that your trucking company is setup correctly to withstand the growing demand for cargo. To determine your business’s current revenue level, compare your current rates with your projected growth rates.

However, you need to carefully consider whether to take on new orders during this time. If growth is strong and your company is fully prepared to meet its demands, then consider taking on new cargo. The more you take on, the more money you’ll earn. The more money you earn, the better your business will invest, again keeping your company as profitable as possible.

Eliminate Unnecessary Expenses

One of the most important things to remember when running a trucking company is that you must be financially solvent and must continue to be financially sound for the future. Many of the largest expenses for trucking companies are related to daily operating activities, including paying for fuel, employee salaries, and the cost of operating your freight and/or passenger trailer fleet. Therefore, when seeking financing, it’s important to operate all tools and equipment in your trucking business to their full capability. Don’t purchase a new fleet of trucks that are over-stocked and don’t utilize all of their current assets.

Maintain Adequate Insurance Coverage

When starting a transportation business, it is essential to understand your insurance coverage needs. What coverage do you need and how much do you need to protect yourself?

In addition, how much additional insurance do you need in order to support your operations?

To set up and maintain adequate insurance coverage, you will need a broker or insurance agent who can help guide you through the process. The resource on this page will provide you with some guidance in knowing what your insurance needs may be. In the meantime, you can take a look at some initial insurance resources on this website.

Bottom Line

While there is much potential for profit when it comes to owning and operating a trucking business, the costs associated with buying an established company are often prohibitive for many prospective owners. Fortunately, there is another way to start a trucking business: buying new trucks and offering them for lease or sale.

This other option requires a bit more initial capital than purchasing an existing trucking company, but it provides the exciting opportunity of starting a trucking business without the expense of buying an established company.

In the interest of being transparent and giving you all the information you’ll need to select between buying and leasing a trucking company, we’ll be detailing both purchase and lease options and providing an overview of the costs associated with each of these two business models.

  • Leasing A Trucking Business
  • Buying A Trucking Company

As with any business, the cost associated with operating a trucking company is ultimately how much money you spend. When buying a trucking company, most costs are related to managing assets, owning equipment, staff, etc. When leasing a trucking business, most of the costs are related to the business in general: rent, marketing, etc.

If you’re interested in leasing a trucking company, it is important to note that a trucking company is a business, not a place. A trucking company is a business model.