Commercial Truck Financing: The Best Options for Your Business

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    Commercial Truck Financing Overview

    There are several options for commercial truck financing to help trucking companies purchase trucks—and, the rates may even be lower than you see with traditional small business loans.

    To help you better understand commercial and semi-truck financing, we’ve compiled this guide. We’ll explain how commercial truck financing works, what the rates and terms look like, and your best options for truck loans. Plus, we’ll review how to qualify for commercial truck financing and answer some frequently asked questions.

    Top options for commercial truck financing:

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    How Commercial and Semi Truck Financing Works

    It’s important to understand that getting commercial and semi-truck financing is very different from getting a loan for a personal vehicle—both in terms of cost and where to find the funding you need. For comparison’s sake, you currently access personal auto loans with interest rates below 5%, but you’ll find that interest rates for business auto loans are between 5% to 30%.

    Additionally, whereas banks are your best option for getting a personal car loan, they don’t lend to most trucking businesses (as well as many small businesses in general) because there’s a high failure rate within the industry. Fortunately, there are alternative lenders focused entirely on truck financing.

    All of this being said, on the whole, commercial truck financing is available for three purposes:

    • Buying a new or used truck
    • Leasing a new or used truck
    • Repairing or upgrading a truck that you already own

    Commercial truck financing can come in many forms, most often, however, truck loans will be available as a form of equipment financing. As the name implies, equipment financing is used specifically for the purpose of buying equipment, like a commercial or semi-truck. With this financing though, the equipment itself serves as collateral for the loan, and the terms and amounts are often directly related to the cost and expected lifespan of the equipment.

    Commercial Truck Financing Rates and Terms

    With this in mind, let’s discuss what you can expect for rates and terms with commercial truck financing.

    Ultimately, the interest rates and terms you receive will depend on factors like your specific need, qualifications, and the lender you’re working with.

    Overall, however, lenders who provide commercial truck financing generally charge annual interest rates between 5% and 30% based on the borrower’s creditworthiness, the age and financial state of the business, and the type and condition of the truck. These interest rates are usually fixed, meaning you’ll make the same payment every month. Terms typically go up to 10 years, with banks generally offering longer terms than alternative lenders.

    For the ideal borrower, commercial truck loans can be up to 100% of the value of the truck you’re purchasing. However, in most cases, you’ll need to provide down payment and you’ll receive financing for the 75% to 95% of the truck’s value.

    Additionally, it’s important to note that the interest rate that the lender quotes for your truck loan may not tell you everything about the total cost. Semi-truck financing companies often charge fees, such as an application fee, credit check fee, and appraisal fee (to evaluate the fair market price of the truck). These can significantly impact the cost of your loan. Therefore, you’ll want to ask the lender for the annual percentage rate (APR) of the loan to find the true cost, including all fees.

    The Best Commercial Truck Financing Options

    Now that you have a better sense of how commercial truck financing works and what you can expect in terms of rates and repayment periods, let’s review some of the best options for acquiring this type of business financing.

    As we mentioned briefly above, the semi-truck loans that are available to you will depend on how strong of a borrower you are, as well as the type and condition of the truck you want to finance. The strongest borrowers with the best trucks may be able to get a bank loan or a great rate with an online lender. Less qualified borrowers, including first-time owner-operators, will typically only qualify for products from online lenders.

    This being said, here are some top options to consider:

    Commercial Truck Loans From Banks

    Although it’s often more difficult for small business owners to qualify for bank loans than for products from online lenders, there are banks that offer some of the best commercial truck loans. On the whole, most local banks don’t offer commercial truck financing because they view it as an expensive, risky investment. However, large national banks often have solutions designed for commercial trucks and other similar financing.

    This being said, the following banking institutions all offer some form of commercial vehicle financing:

    • Wells Fargo: This bank offers loan and lease options for new and used trucks, as well as leasing for semi-trailers. Terms on Wells Fargo equipment finance options range from 12 to 84 months. Wells Fargo works with owner-operators, highway fleets, leasing companies, and more.
    • Bank of America: Bank of America provides commercial truck financing through their equipment loans. These loans can have terms up to five years, fixed rates as low as 3.75% APR, and amounts starting at $25,000. Bank of America also offers loans and leases for cars, vans, and light trucks. These loans have terms from 48 to 72 months and fixed interest rates as low as 3.14% APR.
    • Santander Bank: Santander Bank has an extensive vehicle equipment financing program, with options for vehicle funding, commercial vehicle loans, heavy-duty trucks, and more. With their commercial vehicle loans, you can finance a new or used vehicle with terms from 24 to 120 months and amounts ranging from $25,000 to $10 million.
    • U.S. Bank: This financial institution provides commercial truck financing in amounts up to $500,000. They don’t require a loan down payment and offer terms from 24 to 60 months or more. They also allow you to customize your payment schedule and finance multiple pieces of equipment on one contract.
    • PNC Bank: PNC doesn’t provide very specific information about their transportation finance program. However, they do offer both leases and loans for commercial trucks and other related vehicles.

    Ultimately, banks like these offer semi-truck financing and similar solutions through their equipment financing divisions.

    As we mentioned, it may be more difficult to qualify for a truck loan from a bank (you’ll likely need a great credit score and a down payment)—but it’s still worth exploring the possibility. After all, commercial truck financing from a bank will have the lowest interest rates and longest terms.

    Commercial Truck Loans From Online Lenders

    If you don’t have stellar credit or much to offer for a down payment, then you’ll want to look to online trucking lenders to fulfill your needs. These lenders charge higher rates than banks (5% to 30%) and tend to provide shorter terms (under seven years), but there will be fewer qualification requirements, simpler application processes, and faster funding times.

    Therefore, if you can’t qualify for commercial truck financing from a bank, you may consider working with lenders such as: Smarter Finance USA, Crest Capital, Truck Lenders USA, Balboa Capital, or First Capital Business Financing. Of course, you’ll want to vet each of these lenders thoroughly to make sure they have the right product for your business and can offer a truck loan you can afford.

    As an example, if you’re interested in working with Crest Capital, you can expect truck loans ranging from $5,000 to $500,000 with terms of two to seven years. Crest can offer interest rates as low as 5% and financing for up to 100% the value of your semi-truck. To qualify, however, you’ll need a 650 personal credit score (which is fairly high for most online lenders) and at least two years in business. Crest Capital will not require a minimum annual revenue.

    All in all, there are a variety of online lenders who can provide competitive commercial truck financing. If you can’t qualify for a bank loan, exploring these options will be your next best bet.

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    Commercial Truck Loans From Truck Financing Companies

    Within the realm of online lending for commercial truck financing, you might also consider working with a company that focuses solely on trucks and other vehicles. Working with one of these lenders may be helpful because they’ll have more knowledge about the industry.

    Additionally, you may find that the process is faster, they’ll charge lower interest rates than a general equipment financing company, and require a smaller down payment. In addition, they can work with you to assess the right value for your truck, so you know exactly how much financing you’ll need to cover your costs.

    If you work with Truck Lenders USA, for example, which we mentioned above, you’ll find that this lender has expertise in a variety of different types of trucks and other similar vehicles. Truck Lenders USA offers both commercial truck financing in the form of loans or leases with amounts ranging from $15,000 to $250,000.

    Of course, like with any lender, you’ll want to research and read customer reviews to ensure the company is reliable, trustworthy, and ultimately, someone you’ll feel comfortable working with.

    How to Qualify for Semi-Truck Financing

    The process of obtaining commercial truck loans is a bit different than applying for more traditional business loans. For traditional business loans, your personal credit score, your business’s revenue, and the time you’ve you been in business will largely determine your eligibility for a loan.

    Semi-truck financing, on the other hand, will be different because trucking is such a specialized industry—plus, the truck itself will serve as collateral for the loan, thereby minimizing the lender’s risk. In this way, even if your qualifications wouldn’t be sufficient enough for a traditional business term loan, you may still be able to qualify for a commercial truck loan.

    Your qualifications will play an important role in the terms and rates you can receive with your semi-truck financing. The best borrowers will often be able to qualify for 100% financing and interest rates as low as 5%. Borrowers with less-than-ideal qualifications, such as bad credit or an old truck, will likely need to put money down and pay rates between 7% to 30%.

    Let’s review some factors that will affect your eligibility for commercial truck financing in greater detail.

    Right Type and Good Condition of Truck

    Since the truck serves as collateral for a loan or lease, the lender will place a lot of value on the type of truck and the condition it’s in. One important note: You need to know what truck you’re interested in purchasing or leasing before applying for financing.

    The first thing they’ll consider is whether the truck is a vocational truck or a long-haul truck (a semi). A vocational truck is a garbage truck, a dump truck, or another type of truck with a specific use that’s used primarily within a single geographic area. A semi-truck is a truck that transports freight cargo, often over hundreds of miles.

    The “long-haul” aspect puts more wear on a truck, making the financing of a semi-truck a riskier venture. With more miles on the truck, the more likely it is that the business owner will need to repair the truck. Plus, if your long-haul truck suddenly goes out of commission, you won’t generate as much income and then may fall behind on your commercial truck financing payments.

    Along with the type of commercial truck you’re financing, a lender will also evaluate the condition of the truck. Older trucks make for less valuable collateral, but if you’re just starting out, you may have to work with something used as opposed to something new, which will be much more expensive.

    This being said, if you’re financing a used truck, it should be in good condition. At a minimum, you’ll want to try to look for a truck that is fewer than 10 years old and has fewer than 600,000 miles on it.

    With this in mind, in order for your lender to evaluate you for commercial truck financing, you’ll likely need to provide the following information about your truck:

    • Make, model, and serial number
    • Year
    • Mileage
    • Specify if used
    • Condition report
    • Any major repairs on the truck in the past
    • At least three pictures of the truck
    • Specify if sold privately

    Reputable Truck Vendor

    Another important detail a commercial finance company will look at is who you’re buying the truck from. Typically, commercial truck lenders want to see that you’re buying the truck from a dealer, as opposed to buying a truck through a private party.

    Generally speaking, it’s easier to get a semi-truck loan if you’re buying from a dealership because there’s a more standardized paper trail on the truck, and the lender has great assurances of its condition.

    However, if the truck is in good condition, you can be approved even if you’re buying from a private party or through an auction. Valuation sites like Truck Blue Book (similar to Kelley Blue Book for cars) are making it easier to get approved for trucks purchased through a private party or auction.

    Decent Personal Credit Score

    Your personal credit score is important on any business loan application—including a commercial truck financing application. This being said, however, with commercial truck loans, the strength of your personal credit score matters most for what rates and down payment requirements you qualify for.

    Although a lender will certainly consider your credit score as a general requirement, they may be more likely to accept poor or average credit because the truck you’re purchasing serves as collateral on the loan.

    Nevertheless, a strong credit score will help you receive the best rates and terms on your commercial truck financing.

    No Tax Liens, Repossessions, or Delinquencies on Your Business

    The lender will also look for any recent liens, repossessions, or delinquencies on your business. These might show up on your personal credit report or your commercial credit report.

    This being said, repossessions or delinquencies will be problematic for a commercial truck lender because they show that you’ve had issues managing your money in the past. For this reason, truck lenders will often deny business owners who have:

    • Open bankruptcy
    • Recently had a vehicle repossessed
    • Have past due child support payments

    Down Payment Ability and Business’s Cash Reserves

    Most borrowers have to put some money down on a commercial truck loan. The average down payment on commercial truck financing is 15%, but it can range anywhere from 0% to 25% depending on the strength of the rest of your application.

    In addition to providing a down payment, you’ll also need to show business lenders that you have enough reserves to afford your loan payment and other expenses—such as unexpected repairs, insurance payments, and more. Most lenders like to see cash reserves of at least $10,000, and will likely want to see higher reserves if you have a lower credit score or are a younger business.

    Your Time in Business

    Commercial truck financing for first-time owner-operators is challenging. Many commercial truck lenders won’t consider owner-operators that have been in business for fewer than two years, especially if you’re looking for a large amount of financing (over $40,000).

    This isn’t to say, however, that new trucking businesses won’t be able to qualify for financing. As we’ve mentioned, if you have strong credit, are buying a newer truck in good condition, and you have the cash for a 10% to 20% down payment, you’ll likely be able to qualify for a truck loan even if you’re a new business.

    Truck Insurance

    Commercial truck lenders will also look at the insurance you have for the vehicle.

    You can sometimes be approved for a commercial truck loan without insurance, but generally, you’ll need to secure commercial auto insurance before the funds get deposited into your account.

    This being said, if the truck being financed is the only asset in your business, you’ll typically need:

    • Liability coverage
    • Physical damage coverage
    • Bobtail coverage for non-trucking use
    • Storage and cargo coverage to ensure whatever you’re hauling

    Although these types of coverage will likely be required, you can also purchase supplemental coverage depending on your business’s needs.

    Other Business Information

    Finally, a complete commercial truck loan application will contain a lot of detailed information about your business—even more so than business owners applying for financing within other industries.

    Overall, to qualify for a commercial truck loan, you may have to provide the following documents:

    • Proof of business (e.g. employer identification number or certificate of good standing)
    • Personal and business tax returns (up to three years)
    • Current profit and loss statement for your business
    • Current business balance sheet
    • Current and past bank statements (last 12 months)
    • Your commercial driver’s license (CDL)
    • Any business licenses or requisite certifications
    • USDOT number (U.S. Department of Transportation) for interstate carriers and certain intrastate carriers.
    • Motor carrier number from the Federal Motor Carrier Safety Administration (FMSCA) for interstate carriers and certain intrastate carriers.

    The Bottom Line

    At the end of the day, finding the right financing option for your commercial truck might take some time, but it’s worth it to find a lender who understands your business’s current needs and goals.

    This being said, before you approach a lender, it’s also worth taking sufficient time and effort to find a good truck. After all, as we’ve explained, the type of truck, its condition, and your personal creditworthiness will determine which financing options are best for you.

    Ultimately, one of the benefits of commercial truck financing, as an asset-based financing solution, is that a wide variety of borrowers, even first-time owner-operators and those will average credit, should be able to find an option that works for them.

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    Founding Editor and VP at Fundera at Fundera

    Meredith Wood

    Meredith Wood is the founding editor of the Fundera Ledger and a vice president at Fundera. 

    Meredith launched the Fundera Ledger in 2014. She has specialized in financial advice for small business owners for almost a decade. Meredith is frequently sought out for her expertise in small business lending and financial management.

    Read Full Author Bio