While the trucking industry has faced its fair share of challenges, it remains an important cog in the supply chain—almost 70% of U.S. goods are carried from one state to another by trucks. Even though more than 5.8% of jobs in the country are related to the trucking industry, there is a shortage of truck drivers, with some experts believing the industry needs to hire at least 900,000 more to meet the growing demand.
What does this mean for owners of trucking companies? There are plenty of opportunities for growth if you make the right strategic moves. One of those might be getting equipment financing for your trucking business to ensure you’re able to take advantage of the opportunities that come your way. But where to start . . .
Know What You Need
Before you research your equipment financing options, you must be clear on exactly what you need:
- What type of truck do you need? What will you be hauling?
- How many trucks do you need?
- What is your budget?
You also need to determine whether you want to buy—new or used—or lease, which is where your research should begin.
Equipment Loans vs. Leases
If you choose an equipment loan, you’ll make monthly payments toward the balance plus interest, just like you would for an auto loan. When all your payments are made, you own the truck. This option is smart for new drivers and those who plan to keep their trucks for the long term.
An equipment lease is just like renting; you make monthly payments until the end of your lease, when you need to return the truck, renew the lease or upgrade. This option is smart for drivers who want to regularly upgrade their trucks, don’t have cash for the down payment required with a loan or don’t want to commit long term to a truck.
Once you’ve decided whether a loan or lease is best for you, it’s time to take a look at potential lenders.
Your Lending Options
Getting a loan from a commercial bank is always an option—but the process is complex and there’s more of a chance of getting denied than there is with other financial institutions. Specialized or alternative lenders typically are more flexible than traditional banks and process truck loans faster but your interest rate may be higher. Then there’s always the choice of securing a loan from a dealership, where the processing is easier and you have more personalized financing options but will also need a higher down payment.
As you contemplate the best lender for you, you should investigate what insurance you’ll need.
Truck Insurance
All loan officers will want to see proof of the proper types of insurance for your people (or yourself), vehicles and cargo before any deal is done. Unfortunately, trucking accidents are fairly common, so insurance is an important part of operating a trucking business.
In addition to requiring insurance, lenders will want to be assured that the person or people who will driving have the requisite experience on the road. This will be part of the qualification process.
How to Qualify
Demonstrating that you or those who will be driving for you have had a commercial driver’s license for at least five years is a definite plus when it comes to qualifying for a loan. Your credit score is another important qualifier, although those with bad credit may still qualify for lease-to-own truck programs. You also need to be prepared to hand over a down payment of anywhere from 10% to 50% of the truck’s price.
If you feel confident about your qualification odds, it’s time to submit an application to your chosen lender.
How to Apply
In addition to completing the application, you’ll need to submit copies of your bank statements, tax returns and profit and loss statements. You’ll also be required to show proof that your business is licensed and registered and you have a valid number from the U.S. Department of Transportation.
The Takeaway
As the owner of a trucking company, adding trucks to your fleet is part of a great strategy to build your business. Unlike traditional lenders like banks, whose application and approval process can be cumbersome and often end with a “no,” alternative lenders are in your corner and focused on helping you make your business dreams come true.
If you have any questions about how to secure equipment financing for a trucking business, give Clear Skies Capital a call at 800-230-9822. You may be pleasantly surprised at what you qualify for.