Get the Best Financing for Your Trucking Company
By Space Coast Daily // March 29, 2021
Starting a trucking business from behind the wheel may seem like a viable option as it is fun. However, creating a business without a lot of money in the bank and an operating budget that takes into account more than just fuel and maintenance can feel impossible, but it’s not.
Most truckers have been where you are, and the industry is built around the idea of independent operatorship that comes from owning your own truck. It doesn’t matter if you want to start a fleet, become an owner-operator with only one truck, or have bad credit: there are financing options for trucking that are available to you.
No Money Down
There are two options for leasing or financing vehicles: a no money down lease or loan and a loan with money down. A no money down lease or loan means you lease or finance trucks without putting any money upfront, which is appealing to those who don’t have much money. While a no money down loan works like a loan in which you put money down, you end up paying more interest because you are financing the entire cost of the vehicle at once.
This can make a big difference—if you are paying $100,000 at five percent interest, that is around 5,000 dollars in the first year. If you had 20 percent down, you would save $1,000 in the first year alone in interest. That can add up on a multi-year note with large loan amounts.
It’s often difficult for startups to get the financing they need to operate. While a startup might be able to get capital from angel investors or other sources, it might not be enough to purchase the commercial trucks needed for their business. Angel investors also mean someone else has an ownership stake in your trucking business, which impacts one of the main reasons many people get into trucking.
Equipment financing companies walk the fine line between funding and rent-to-own arrangements, solving this dilemma in favor of startups’ needs. Since these loans utilize the collateral of your truck you qualify for much more than you otherwise might. If you have shakier credit and want to run without the input of a business partner, this might be a great way to go, even though the interest rates can be a bit higher.
If you are financing for a fleet, you likely already own more than one truck. The size of your fleet will spill over into how well you qualify for a loan. For example, lenders will likely give you more points in regards to your credit history if you have been financing commercial vehicles in the past and have shown that you are able to pay back those loans.
The size of your commercial vehicle fleet will affect whether you get a fair interest rate when applying for a loan. In most cases, this is for the better. Basically, a history of repaying loans will show that you are reliable to continue.
This is an easy startup option if you are low on funds. The biggest downfall is that you are not gaining equity in your vehicle. Since semi-trucks are priced more like houses than cars, A history of payments on a traditional loan will net you ownership in a vehicle eventually. With a lease, you never own the vehicle, so you will be paying for a long time unless you choose to buy out balloon payment at the end of the term.
Regardless of what financing option works best for you, you can find solutions to get your trucking career off the ground, regardless of credit.