The Best Commercial Trucking Business Loans
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The commercial trucking business can be highly profitable as retail businesses depend on truckers to move their goods from the place of purchase to their stores. However, you need a sizable amount of capital to get your trucking business up and running. Commercial trucking business loans provide solutions to funding challenges that truckers struggle with.
There are many reasons you should get truck driver loans. Trucking incurs day-to-day costs like fueling, maintenance, salaries, repairs, and acquiring new vehicles. Emergencies that attract additional expenses may also arise.
Trucking financing is available to fleet owners and owner-drivers. Whether you simply need the cash flow to keep your business afloat or expand it.
Getting the right loans can be tricky as not every single loan offer may be perfect for your unique situation. Fortunately, we have the best loans for trucking companies. Read on to see the different loans available.
Types of Commercial Trucking Business Loans
Before choosing a loan you need to be sure that the loan amount is right for your business so you don’t end up with a cash flow shortage or excess debt. You also want to pick a loan option that your business can afford and bring the highest investment return. You can do this by calculating your ROI (Return on investment).
A Quick Look at the Best Types of Trucking Loans:
Small Business Administration (SBA) loans
SBA loans have relatively long repayment periods with low-interest rates. Established trucking businesses and startups can access these loans. However, startups typically need to provide substantial collateral. SBA trucking loans are best for huge financial commitments like buying real estate, buying a competitor’s business, or buying a fleet of trucks.
An SBA loan can provide up to $5 million with a 10-year repayment plan. SBA loans include Veteran Advantage Loans, SBA Micro-loans and SBA 7 (a) loans.
Taking an SBA loan from Upwise can be done in as fast as two weeks with a 6.75% interest rate starting point.
Equipment Financing
An equipment financing loan like the name implies provides funding strictly for acquiring new vehicles, tools, and technologies. This loan takes the pressure of purchasing costly trucking equipment off your business cash flow.
The equipment purchased serves as collateral for the loan, so lenders may be more inclined to offer it.
You can get up to 100% of the equipment funded from Upwise within two days.
Invoice / Freight Factoring
The period between sending out invoices and receiving payment can be lengthy sometimes. And the delay might affect the day-to-day activities of your trucking business. With invoice/freight factoring, you can get cash on your invoice before clients pay.
Some lenders will buy your invoice and give you a part of the invoice value. They collect a percentage of the invoice when your customer finally pays up.
In some cases, you can get up to 90% of your invoice value when you use the Upwise invoice financing option.
Business Lines of Credit
A business line of credit is like having a credit card for your business. It allows you to borrow money up to the limit set by the lender. This loan option gives you access to funds without processing delays. Also, you only need to pay interest on the amount you take out and not the total amount made available.
Trucking businesses can get business lines of credit from banks and online lending platforms. When selecting a business line of credit option, pick one that tops up each time you pay back funds you take out.
Upwise offers business lines of credits of up to $250,000 that can be delivered in less than 24 hours.
Short-Term Business Loans
In times of emergencies or when quick funding is needed to execute a new contract, a short-term business loan could come in handy. These types of loans usually have less strict qualification criteria and are disbursed within 24 Hours. The repayment period for a short-term loan does not exceed 12 – 24 months.
However, the interest rates for short-term business loans are high and you should exercise caution when taking one. Trucking businesses that have bad credit or have not been in operation long enough to qualify for other loans may find a short-term loan as their only option.
The short-term loans offered by Upwise Capital can amount to $5 million beginning with a 9.99% interest rate.
Business Credit Cards
You can sort out business needs like fuel and repairs with a business credit card. It works like a business line of credit but with a smaller credit limit, most times around $30,000. To maintain a good credit score, you need to pay off your card expenses on time, every month.
Business credit cards are the easiest transportation business loans to access. Some business credit cards even give your rewards for buying certain goods.
Merchant Cash Advance
An MCA (Merchant Cash Advance) is technically a sale of future revenue. You repay it through your business credit card transactions. Unlike other loan types, an MCA lends you money based on a prediction of future revenue. Your credit score does not affect your eligibility.
You can get a same-day MCA from Upwise, payable within 3 months and up to 18 months.
Challenges in Trucking Financing
Even with the ample loan offers available, transportation industry business funding may be challenging to get. Some reasons for that include
- Shortage of labor: A 2019 report by the American Trucking Associations revealed that the trucking industry may lose 160,000 drivers by 2028 because of an aging workforce.
- High running cost: the trucking business is capital intensive and that sets expectations for high returns on investment. Economic instability and other factors may slow down the rate of returns.
- Asset depreciation: the value of trucks and other equipment may reduce over time due to wear and tear or accidents. This compromises the integrity of equipment as collateral.
The trucking business falls under the high-risk business categories and as such many financing institutions shy away from it.
Tips to Improve Your Chances of Qualifying for Commercial Trucking Business Loans
Here are a few things you can do to boost your chances of getting a loan for your business.
- Proper accounting: do not take book-keeping for granted. Get an accountant or use accounting software to keep track of things. Make sure that you never mix up personal and business funds.
- Adequate insurance: the trucking business is full of risks. Having a good insurance plan on your equipment and other assets will minimize losses and improve business credibility. A lender is more likely to trust an adequately insured business.
- A good personal credit score: Your credit score can tell a lot about your money management skills. A poor score may discourage lenders from investing in your trucking business. This affects small trucking businesses the most.
Upwise Capital can help you
If you don’t understand how to set your business up to qualify for the loan of your choice, you may lose out on great opportunities. The great news is that help is not hard to find. Upwise Capital has over 20 loan products that truckers can benefit from. Simply fill our Funding Application Form and get loan offers tailored for your business delivered to you.
Documents You'll Need to Apply
- Completed Application
- Driver’s License
- Voided Business Check
- Business Bank Statements (Last 6 Months)
- Credit Score
You may also be requested to provide the following for larger dollar amounts over $100K:
- Balance sheet
- Profit & Loss Statements
- Business Tax Returns
- Personal Tax Returns
- Account Receivables Report (if securing AR)
- Inventory List (if securing inventory)
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Great business advice in this articles helped me alot