Are you considering adding a commercial truck to your business’s vehicle fleet? Unless you have substantial cash reserves, financing will likely be necessary.
Securing financing for commercial trucks differs from conventional car loans, which can complicate the application process.
Knowing where to find lenders and understanding their criteria for evaluating applications can help you secure the best commercial truck financing rates and get your business on the road quickly.
Costs of Owning a Commercial Truck
In 2021, the average cost of trucking per mile in the U.S. was $2.90, encompassing expenses like wages, equipment maintenance, insurance, licensing, fuel, and tires. This cost is significant given that many truck-tractors travel over 100,000 miles annually.
Operating a business that relies on commercial vehicles presents unique challenges. Commercial trucks require specialized maintenance, making them costly assets for small businesses to manage.
Moreover, industries like freight trucking are often deemed high-risk due to their elevated failure rates. Consequently, some lenders may be reluctant or unwilling to provide in-house semi-truck loans or other forms of 18-wheeler financing.
Who Offers Commercial Truck Financing?
Major banks, specialized truck financing firms, and alternative lenders provide options for commercial and semi-truck financing. However, smaller regional banks may be more hesitant to offer funding for semi-truck loans. Let’s explore each type of lender in more detail.
Large National Banks
While smaller regional companies and chains typically avoid providing semi-truck financing due to the associated risks, large national banks like Wells Fargo and U.S. Bank offer financing options for commercial trucks and trailers. These banks leverage their extensive resources to provide competitive rates and extended loan terms.
However, banks generally reserve approval for the most qualified borrowers. If you are seeking loans for 18-wheelers or dump trucks and have challenges like bad credit, low revenues, or a limited business history, your chances of approval are typically slim.
Bank Requirements
Banks maintain stringent requirements for borrowers. Typically, you must possess a good or excellent credit score to qualify. According to Experian, a FICO score of 670, widely used by lenders, is considered good.
Additionally, banks prefer businesses with a proven track record of generating revenue. They specialize in handling large loan amounts, necessitating confidence that borrowers have the experience and capability to repay the loans.
This criteria makes banks an ideal option for experienced commercial truck owner-operators. However, startups and first-time buyers may need to explore alternative financing options.
Related: Bad Credit Business Loans? These Are Your 5 Best Options
Commercial Truck Finance Companies
Some lenders specialize in equipment financing, including those focused exclusively on commercial truck and semi-truck financing.
Here are some notable commercial truck financing companies:
- CAG Truck Capital: Offers engine overhaul and programs for semi and commercial truck financing.
- Dostal Equipment & Financial, Inc.: Provides financing for semi trucks, equipment, and commercial truck trailers.
- Pedigree Truck Sales: Specializes in financing for semi trucks and semi trailers.
- Wyatt Leasing: Offers equipment loans and leases for transportation, towing, agriculture, construction, and waste industries.
These truck finance companies excel in their expertise, which can assist you in making informed purchasing decisions and facilitating smoother transactions with sellers. However, specialized lenders like commercial truck financing companies may have requirements that could be challenging for startups to meet.
Truck Finance Company Requirements
Commercial truck financing lenders set specific expectations for borrowers, including criteria such as credit scores and time in business. Meeting these minimum requirements is essential to qualify for a commercial truck loan.
While specialized commercial truck financing companies generally have less stringent requirements compared to banks, approval is not guaranteed. Due to their expertise in the trucking industry and the high volume of applications they process, they may be less inclined to approve borrowers who do not meet their qualifications.
Alternative Lenders
Online lenders provide quick and secure access to commercial truck loans and fleet financing.
These lenders offer funding opportunities to business owners who often struggle to meet the stringent requirements of banks and traditional equipment lenders. However, in exchange for this convenience, commercial loans from online lenders typically come with shorter repayment terms and higher interest rates compared to conventional lenders.
For those seeking commercial or semi-truck financing with bad credit, alternative lenders provide some of the best options for bad credit commercial truck loans.
Certain lenders specialize in equipment financing specifically for trucks and other machinery, such as National Funding and US Business Funding. Others offer a range of financing products that can be used for various business needs.
Alternative Lender Requirements
Alternative lenders are more inclined to work with applicants and are less likely to disqualify them based on factors like bad credit or other common reasons. This makes alternative lenders a strong choice for younger businesses or business owners who are in the process of rebuilding their credit.
What to Know Before Applying for Commercial Truck Financing
Before contacting lenders, ensure you gather all the necessary documents and information required for a commercial truck financing application. Whether you’re seeking to refinance a commercial truck loan, obtain commercial truck repair financing, or secure new semi-truck financing, you’ll typically need to provide details about the vehicle, your business, and your personal information.
Gather Information About Your Commercial Truck
Unlike other business loans, commercial truck financing requires detailed information about the deal, including specifics about the seller and the vehicle itself.
Commercial truck financing is secured by the vehicle, making the details of the truck almost as crucial as your creditworthiness. Having all this information readily available allows lenders to assess whether it’s a wise investment for you and for them.
Firstly, lenders will want to know the type of commercial truck involved, which generally falls into two categories:
- Vocational Trucks: These are single-purpose vehicles typically used in specific geographic areas. Examples include garbage trucks, ice cream trucks, and dump trucks.
- Long-Haul or Transportation Trucks: These are standard semi-trucks used for transporting cargo over long distances.
Next, prepare to provide the following details about the truck you intend to acquire:
- Year, make, and model
- Vehicle identification number (VIN)
- Mileage
- Condition report (if pre-owned)
- Repair history (if applicable)
- Photos/videos
- Seller information
Generally, newer vehicles are considered lower risk by lenders. Mileage also plays a significant role; for instance, an 8-year-old truck with 150,000 miles might be less risky than a 4-year-old truck with 500,000 miles.
Buying from a dealership provides lenders with assurance regarding the vehicle’s condition. Dealerships typically maintain detailed repair histories, which can help identify any potential issues that could affect the truck’s reliability and your ability to generate revenue.
Commercial Truck Insurance
Commercial truck financing companies also consider insurance costs when evaluating loan applications. Given the potential expenses associated with repairs and liabilities, lenders prioritize ensuring that an accident won’t jeopardize your ability to repay the commercial truck loan.
To secure a commercial truck loan, you will likely need to demonstrate that you have adequate insurance coverage. Your insurance plan should typically include:
- Liability coverage, which includes bodily injury liability
- Non-trucking liability coverage for when the truck is used off-duty
- Physical damage coverage
- Cargo coverage
- Trailer interchange coverage
The type of coverage required will depend on whether you are purchasing or leasing the truck. It’s essential to select an insurance plan that strikes a balance between a manageable monthly payment and comprehensive coverage. This ensures you are adequately protected while meeting the requirements of your commercial truck financing agreement.
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Truck Insurance Costs
According to Progressive Commercial, their national average monthly cost for commercial truck insurance ranged from $640 for specialty truckers to $982 for transport truckers.
Submit Business Financial Documents
When applying for commercial truck financing, lenders will require documentation demonstrating you have the funds to repay your loan. You may be asked to submit the following:
- Proof of business
- Business tax returns
- Profit-and-loss statements
- Balance sheets
- Bank statements
They may also request your U.S. Department of Transportation (DOT) number and motor carrier numbers issued by the Federal Motor Carrier Safety Administration (FMCSA).
Upon approving your purchase, lenders will scrutinize your documentation and evaluate your creditworthiness, beginning with the sustainability of your business.
While first-time buyers can qualify for commercial truck financing, having a history of significant revenues and a robust business plan will secure better loan rates and higher funding amounts. Moreover, experience in the industry assures lenders that you understand the business, reducing their perceived risk.
Add 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 they can trust you to repay them.
Some things truck finance companies look for are:
- Current credit score
- Past delinquencies or bankruptcies
- Lending history
- Criminal background
Need funds to buy or repair a commercial vehicle?
Commercial Truck Loan Rates and Terms
A few factors will impact your commercial truck financing interest rates, loan terms and down payment.
Buying vs. Leasing Your Commercial Truck or Semi
The optimal method for financing a commercial truck will hinge on your specific needs and financial circumstances. It’s crucial to consider that whether you choose to purchase or lease will significantly impact the terms of your commercial truck financing or loan.
Lease agreements often span repayment terms of up to 5 years. Furthermore, leasing entails lower monthly payments because you’re not financing the entire value of the vehicle, which reduces the lender’s risk. While you can opt to buy out the lease, you won’t gain ownership of the truck unless you do so.
On the contrary, purchasing typically involves longer repayment periods and higher monthly payments. However, once you’ve fully repaid the debt, you will own the truck outright.
Down Payment for Your Commercial Truck Loan
Although some lenders may offer commercial truck financing with no down payment and provide up to 100% of the vehicle’s value, many require an initial payment.
Typically, the down payment can range from 10% to 30% of the total loan amount. For instance, if you secure an $80,000 loan for financing a commercial dump truck and the lender mandates a 15% down payment, you would need to pay $12,000 upfront.
Commercial Truck Loan Interest Rates
Commercial truck financing interest rates generally range from 5% to 30%, depending on the lender, your credit history, and your overall financial situation. This is crucial to consider, especially if you’re exploring options for bad credit commercial truck financing.
Traditional banks typically offer the lowest rates, starting around 5%.
Equipment and alternative lenders might begin around 8% for their most creditworthy borrowers. If you have a lower credit score or are financing a riskier purchase, your interest rate could be in the teens or higher.
Commercial truck loans often feature fixed interest rates and structured repayment terms that can span from 1 to 10 years, varying by lender and specific loan terms.
Small Business Tip
Before finalizing your commercial truck financing, it’s essential to request a detailed breakdown of rates, terms, and fees from your lender. Understanding the annual percentage rate (APR) will provide a clear picture of the total interest expenses. Additionally, be aware that origination and appraisal fees are customary in such transactions.
For an initial estimate of your loan expenses before engaging with a lender, you can utilize our equipment loan calculator.
Applying for Commercial Truck Financing
Once you’ve selected the ideal commercial truck and compiled all necessary documentation, it’s time to begin the application process.
If you’re applying with a bank or specialized equipment lender, you’ll need to connect with one of their loan specialists. They will review your information and prequalify you for commercial truck financing before conducting a thorough evaluation of your credentials. This process can span several weeks, making it less suitable if you require expedited funding.
Alternatively, online lenders can streamline the process, often providing funding within days. Through iBusinessLender’s straightforward application process, you can secure approvals from multiple lenders within a few hours. Simply provide your business and personal financial details, and you’ll be well on your way to obtaining the commercial truck financing necessary to get your new business vehicle on the road.
