The surge in alternative lending in 2018 and good financial outlook for 2019 has made it easy to get loans for truck drivers. Expanding or running a transportation business is not easy. You have to buy and repair trucks all the time. Equipment and cash flow are the basic needs to be successful as a truck driver.
A loan for trucking can help you get up and running when a truck breaks down. Or when you’re having a slow month with fewer loads to carry or transport. Here are just a few ways having working capital for a trucking business helps:
- Buy or lease new trucks in your fleet
- Cover repair and maintenance costs (tires are the most common trucking expense)
- Hire more drivers to grow your team
- Handle payroll and taxes while invoices are outstanding (yet to be paid by your customers).
How to get a trucking loan?
To start, don’t look towards traditional banks or credit cards for funding. The process is slow, full of time-consuming paperwork, and approval rates are low.
For a trucking and transportation business, the best choice is alternative lenders and online lending companies. They provide multiple loan products like term loans, equipment financing, invoice factoring, and lines of credit.
The core benefit of online lenders is that they don’t require any collateral. It’s not a good idea to use personal collateral for a business loan (which banks require). That would be putting your personal assets at risk in the event your trucking business comes to a halt or you miss any payments.
Trucking loans factors to consider
In order to get the best trucking loan possible, there are 4 factors you should consider. Inquire about these when you begin applying for your transportation business loan:
- Interest rate / APR
Understand what your actual annual percentage rate (APR) is. Some lenders might show you a rate that has been calculated down to your monthly payments. Always ask what the APR you’ll be paying on the loan. It’s the best way to compare different offers from lenders.
- Payment options
The goal is to get flexible payment options that fit your needs and don’t have a penalty for pre-payments. Alternative lenders can provide flexible options that include anything from daily payments, weekly, bi-weekly, or monthly payments. What you want to be careful of is any penalties you can be liable for if you decide to pay off the loan early.
- Paperwork process
In comparison to banks or SBA loans, online lenders are usually far quicker and lighter on their paperwork. That helps you get a quicker loan. But you can still speed up the process even further. We recommend having your tax return and a few months of banking statements already handy.
- Collateral requirements
The only funding option you’ll need collateral for is a equipment financing for trucks. The truck itself serves as the collateral. In other types of funding like term loans, you don’t need to put up any collateral to get approved. The trucking loan is based on your credit score, time in business, and income.