Looking to add a commercial truck to your business’s vehicle inventory? Unless you have a hefty cash reserve, you’ll likely need some type of financing.
Commercial truck loans and financing work differently than a conventional car loan, which can make the loan application process challenging.
If you know where to look for lenders — and what they look for when judging your application — you can find the best commercial truck financing rates and get on the road in no time.
Costs of Owning a Commercial Truck
In 2019, the average cost per mile for fleets was $1.652, according to the American Transportation Research Institute. This is considerable when you realize that truck-tractors are driven more than 93,000 miles a year on average.
As you can see, running a business that involves the use of commercial vehicles comes with a particular set of challenges. Commercial trucks need special upkeep that make them expensive assets for any small business.
Additionally, many of these industries (especially freight trucking) are considered risky because failure rates are high. Some lenders are hesitant or unwilling to offer in-house semi truck loans or other 18 wheeler financing.
Who Offers Commercial Truck Financing?
Large banks, truck financing companies and alternative lenders offer commercial and semi truck financing, while smaller regional banks may shy away from funding these semi truck loans. Let’s look at each type of lender in detail.
Large National Banks
Although smaller chains and regional companies don’t usually take on the risk of providing semi truck financing, you can find large national banks that finance commercial trucks and trailers. Their resources allow them to offer the lowest rates and longest terms of any lender.
Only the most qualified borrowers are approved. If you’re looking for 18 wheeler or dump truck financing and you have bad credit, low revenues or don’t have an established business history, your chance of approval is slim.
Some lenders specialize in providing funding for equipment. This includes a few dedicated strictly to commercial truck and semi truck financing.
Examples of these specialty lenders include the following:
CAG Truck Capital
Dostal Equipment & Financial, Inc.
Pedigree Truck Sales
The main benefit these truck finance companies offer is their knowledge. Their experience can help you find good value in your purchase and better facilitate the deal with the seller. This leads to a smoother process overall.
However, specialized lenders, such as commercial truck financing companies, sometimes carry requirements you won’t be able to meet if you have a startup or you’re a business owner working to repair your credit.
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Online lenders offer fast, secure access to commercial truck loans and commercial truck fleet financing.
These lenders extend funding opportunities to business owners who are often unable to meet the requirements of banks and select equipment lenders. For this convenience, your commercial loan will likely have shorter repayment terms and higher interest rates than you’d find with a conventional lender.
If you’re seeking commercial or semi truck financing with bad credit, alternative lenders offer some of the best bad credit commercial truck loans available.
Ready to Purchase or Repair a Commercial Vehicle? Discover financing options.
What to Know Before Applying for Commercial Truck Financing
Before you reach out to lenders, gather everything they require for a commercial truck financing application.
Regardless of the lender and whether you’re looking to refinance a commercial truck loan, get commercial truck repair financing or obtain new semi truck financing, you’ll need to provide information on:
Gather Information About Your Commercial Truck
Unlike other business loans, commercial truck financing lenders need to know the exact details of what you’re using the funding to purchase, including information about the seller and the vehicle.
Commercial truck financing and loans are secured by the truck itself, making the vehicle almost as important to vet as your creditworthiness as a borrower. Having all of this information on hand allows lenders to make a judgment as to whether it’s a smart investment for you and, by extension, them.
First, they’ll need to know what kind of commercial truck it is. This can be broken down under 2 types: vocational and long-haul (transportation) vehicles.
Vocational trucks are single-purpose vehicles, often set to be used in a limited geographical area. Examples include garbage trucks, ice cream trucks and dump trucks.
Long-haul or transportation trucks are your common semi trucks used for hauling cargo across long distances.
The next thing your commercial truck financing lender will ask for is basic information about the truck.
Be ready to provide the following:
Year, make and model
Vehicle identification number (VIN)
Condition report (if pre-owned)
Repair history (if applicable)
Generally, newer vehicles pose less risk to lenders. Mileage, of course, plays a part. For example, an 8-year-old truck with 150,000 miles may be less risky to invest in than a 4-year-old truck with 500,000 miles.
Buying from a dealer assures lenders they can trust the condition of the vehicle. Dealerships also will have more detailed repair histories that can alert you (and the lender) to any potential problems that could leave you without a truck to generate revenue.
Commercial Truck Insurance
Another cost that commercial truck financing companies take into account is insurance. Repairs and liabilities can be expensive, so lenders want to know that an accident won’t put you in jeopardy of defaulting on your commercial truck loan.
To obtain a commercial truck loan, you’ll likely need to show you have insurance. Your plan may need to have the following:
If the lender approves of your purchase, they’ll review your documents and assess your fundability, starting with the viability of your business.
Although you could receive commercial truck financing as a first-time buyer, a history of strong revenues and a solid business plan will afford you better rates and higher funding amounts. Experience in the business assures a lender that you know the industry, lowering their risk.
Adding Your Personal Information
Commercial truck financing companies consider your personal history before they accept your application.
Since the industry is risky, lenders need to know that they can trust you to repay them.
Commercial truck financing lenders have their own expectations for borrowers. From credit scores to time in business, you’ll have to meet a lender’s minimum requirements to qualify for a commercial truck loan.
Banks have the strictest prerequisites. Generally, you’ll need to have a good or excellent credit score to qualify. According to Experian, a 670 FICO score, a credit score reviewed by many lenders, is considered good.
Banks also favor businesses that have a long history of generating revenues. They tend to work with high-amount loans, so they need to know you’re experienced and capable of making more than enough to pay them back.
This makes it a great choice for business owners with multiple years of experience. Startups and first-time buyers may need to look elsewhere.
Truck Finance Company Requirements
Specialized commercial truck financing companies aren’t as tough as banks, but approval is far from guaranteed. Because they have such a handle on the trucking industry and process a high volume of applications, they might not be as likely to approve less-qualified borrowers.
Alternative Lender Requirements
Alternative lenders are more likely to work with you and not disqualify you from obtaining commercial truck financing for bad credit or other common reasons. This makes them an excellent option for younger businesses or business owners who are repairing their credit.
Commercial Truck Financing Interest Rates and Terms
A few factors will impact your interest rates, payment terms and down payment.
Buying vs. Leasing Your Commercial Truck or Semi
The choice to buy or lease has a significant effect on the terms of your commercial truck financing or loan.
Leasing repayment terms can extend up to 5 years. Leasing carries lower monthly payments because you’re not taking out a loan on the full value of the vehicle, reducing risk to the lender. You can “buy out” a lease, but otherwise, you won’t own the truck at the end of your lease agreement.
Buying, on the other hand, typically equates to longer repayment terms and higher payments, but you’ll own the truck once the debt is paid in full.
Commercial Truck Loan Interest Rates
Commercial truck financing interest rates usually fall between 5%-30%. The rate you get will be based on your lender, credit history and financial health. So take this into consideration if you have bad credit but are seeking semi truck loans or other financing.
As we already covered, banks offer the lowest rates, which can start around 5%.
Equipment and alternative lenders may start around 8% for their most qualified borrowers. If you have a low credit score and are making a riskier purchase, you could be facing a rate in the teens or higher.
Often, commercial truck loans have fixed interest rates and a set term. Repayment terms can range from 1-10 years, depending on the lender and loan.
Small business tip:
Ask your lender for a full list of the rates, terms and fees before signing. The annual percentage rate (APR) will give you a complete look at how much you’ll pay in interest. Keep in mind that origination and appraisal fees are typically standard.
While it’s possible to receive up to 100% of the value for your commercial vehicle and get your business loan with no money down, most lenders will require a certain percentage of funds up front.
The amount of your down payment could be 10%-30%. For example, if you take out an $80,000 loan for commercial dump truck financing with 15% down, you’ll need a $12,000 down payment.
Applying for Commercial Truck Financing
Once you’ve found the perfect commercial truck and gathered all of the information you need, it’s time to apply.
If you’re applying with a bank or specialized equipment lender, you’ll need to connect with one of their loan specialists. They’ll go over your information and prequalify you for commercial truck financing before taking a closer look at your credentials. This process can take weeks, so it may not be an option if you’re in a hurry.
Online lenders can get you funding in just a few days. Through Fast Capital 360’s quick and easy application process, you can receive approvals from multiple lenders in a few hours. All you need to do is provide your business and personal financial information. Then you’ll be on your way to receiving the commercial truck financing you need to hit the road in your new business vehicle.