What Trucking Business Loans Are & How They Work

By Susan Guillory · May 22, 2024 · 9 minute read

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What Trucking Business Loans Are & How They Work

If you’re in the trucking business, whether that means running a tow-truck company, a fleet of semis, or even using trucks to deliver products, your biggest expense is the vehicles that your staff drives. Without those trucks, you can’t operate. But do you have the cash you need to buy those high-dollar trucks?

A trucking business loan can help you purchase new trucks in order to start or grow your trucking business. Keep reading to learn more on what a trucking loan is, the pros and cons of trucking business loans, and other business loan options to consider for your small business.

What Is a Trucking Business Loan?

Small business loans for truckers are specifically used for purchasing a commercial truck, with the vehicle you’re purchasing acting as collateral to secure the loan. A loan backed by collateral can sometimes help you secure lower interest rates than you’d get with an unsecured loan, too.

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How Do Trucking Business Loans Work?

When it comes to small business loans for trucking companies, there are a few differences in how they work compared to other types of small business loans.

Because the truck you’re buying serves as collateral, you may be asked questions about the vehicle in the loan application, including the year, make and model, and what you will use it for.

Once you’re approved, you can purchase the truck or trucks. The lender, whether that’s a bank, credit union, or online lender, will then have a lien on the truck, meaning that if you can’t pay back your loan, the lender has the right to seize the truck and sell it to cover your remaining debt.

A Word on Collateral

What is collateral, exactly? It’s a physical asset that the lender can take a lien on. This means that if you are unable to pay your loan back, the lender could seize the asset and sell it to cover the remaining debt.

In traditional loans, collateral might be a piece of equipment or real estate. With trucking loans, the truck you’re buying serves as the collateral, so you don’t have to come up with another asset for collateral.

Pros and Cons of Trucking Business Loans

Like any big decision, deciding to take out one or more trucking business loans should carefully be considered.

 

Pros of Trucking Business Loans Cons of Trucking Business Loans
Get the financing you need to buy trucks, even if you don’t have the cash on hand Can only use funds to pay for truck
Won’t need to put down additional collateral If you can’t pay, the vehicle can be seized

Pros of Trucking Loans

If not having cash to buy trucks has stopped you, taking out a trucking business loan can ensure you have the capital you need to buy the vehicles to grow your business. And because the vehicle acts as collateral, you don’t also need to come up with cash or another asset as additional collateral for the loan.

With the vehicle acting as collateral, you may qualify for a lower rate than you would with an unsecured loan, and borrowers who aren’t as creditworthy may have an easier time qualifying.

Cons of Trucking Loans

If you’ve never taken out financing for your startup, business loans for trucking may be unfamiliar, and you may not realize the true cost of a loan. You’ll be paying interest on the life of the loan, and many lenders charge fees, which can add up.

If you aren’t able to make your monthly payments, the lender can take your truck and leave you without the vehicle you need to run your business.

It may sound great to get a loan for $100,000 to buy trucks, for example, but if you don’t have a plan to pay it back, you could find your business financially strapped. You can take the maximum repayment period possible (usually 72 months) to reduce your monthly payment, though realize your truck will depreciate over time, and you might still be paying it off when it’s time to replace the truck.

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Using a Trucking Business Loan vs. Conventional Business Loan vs. Equipment Loan

Trucking business loans are just one option you have when it comes to financing a vehicle for your business. There are other loans you can also use to buy the vehicles you need, and each has its own distinct characteristics.

 

Trucking Loan Equipment Loan Conventional Loan
Can be used to purchase commercial truck Can be used to buy equipment, including vehicles Can be used for any business-related expense

Recommended: Business Consolidation Loans

Trucking Business Loan

You already know that you can use a trucking loan to purchase a vehicle for your business. If this is the only thing you need financing for, it may be your best option.

Conventional Loan

You can use a conventional business loan to purchase a truck or cover any other business-related expense, including payroll, marketing, equipment, supplies, inventory, rent, and fees. If you need money to not only purchase a truck but also cover other expenses, this may be the right fit.

Equipment Loan

Another option for purchasing your business truck is an equipment loan. With an equipment loan, you can buy vehicles in addition to things like mixers, cranes, industrial ovens, and computers. If you need any other type of equipment in addition to a vehicle, consider taking out an equipment loan to buy everything at once.

Qualifying for Trucking Business Loans

If you’ve already researched how to apply for business loans, you’re well-prepared for applying for a trucking business loan. There are few differences in the process, though, other than having to fill out a few details about the vehicle you’re buying.

Each lender will have slightly different criteria to qualify for a loan, so before applying, see what these criteria are. Some may require you to have a certain credit score or time in business, whereas others may look at your annual revenues.

With some lenders, you can check to see if you prequalify without an impact on your credit score. This can give you a sense of what sort of rates you could get with a trucking loan. The collateral may help if your business is less established or your credit score isn’t great.

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Uses for Small Business Loans for Truckers

Below are a few scenarios where you might benefit from truck financing.

•  Starting a tow truck business. If you’re starting a tow truck business, you’ll need at least one truck to get started. You can take out a loan for that truck and, as your business thrives, you can pay it back and borrow more money to expand your fleet. Keep in mind that if your business is brand new, you may be limited in your financing options and/or pay higher interest.

•  Running a semi truck business. If you are an owner-operator of a semi truck business, you can also benefit from a truck loan. Working on your own, you’ll quickly make enough to repay the loan and keep profit.

•  Needing a new truck to continue your business. Another situation where you might need a truck loan is if your current truck is no longer functional, either because it needs major repairs or just isn’t as efficient as it once was. If you find yourself desperately needing a vehicle, taking out a business truck loan can alleviate the stress this situation can cause.

Recommended: How Much Does It Cost to Start a Business?

Types of Loans for Trucking Businesses

There are several different types of loans to purchase the truck or fleet of trucks your business needs.

Short-Term Business Loans

Deciding what kind of business loan for a trucking company you need will depend on how quickly you want to pay back the loan. If you need cash fast to make the purchase but know you could pay it back in a few months, a short-term business loan is an option.

Also, note that these loans tend to have higher interest than long-term loans, so if you qualify for a conventional loan, you may get a lower interest rate and can aim to pay the loan back before the repayment period is over.

Small Business Line of Credit

A small business line of credit, or LOC, gets you access to cash when you need it, rather than distributing it all up front. Consider business lines of credit if you know you’ll be buying more trucks in the future or have other needs for capital.

SBA Loans

Whether you’re an owner-operator of a semi or have another trucking business that’s been around for at least two years, you may qualify for an SBA loan. These loans have long repayment periods and low interest rates, but the qualifications are stringent and funding times can be long.

Equipment Financing Loans

Equipment financing loans work similarly to trucking loans in that the equipment you’re buying — in this case, a truck — acts as collateral for the loan, which helps you save in interest. There are a few types of equipment financing, including heavy equipment financing, so see what your options are.

Alternatives to Trucking Loans

Alternatives to trucking loans include business credit cards, merchant cash advances, and invoice financing as a means to get the cash you need for your business. You can also consider borrowing money from family or friends if that is an option.

Recommended: Loans for Small Business Expansion

Choosing the Right Trucking Loan for Your Needs

Now that you’ve learned just how many types of loans you have as an option to buy your business’ truck, how do you decide which is right?

Start by considering what you need the capital for and how much you need. Are you looking to just buy one truck or do you need a fleet? Do you need to purchase other business materials or just trucks? Do you need all the cash right now or do you need some now and more later? What sort of loans do you qualify for? How long do you want to repay the loan?

Once you’ve answered these questions, research lenders and their criteria for the type of loan you land on. And make sure to comparison shop with multiple lenders. Doing so could save you hundreds or even thousands of dollars over the life of the loan. Even a slight reduction in interest can make a big difference, and every penny you save is money you can reinvest in your trucking company.

If you’re seeking financing for your business, SoFi can help. On SoFi’s marketplace, you can shop top providers today to access the capital you need. Find a personalized business financing option today in minutes.


Get personalized small business financing quotes with SoFi's marketplace.

FAQ

Can you get a business loan to start a trucking company?

With some lenders, you may be able to take out a loan for a new business, but most conventional and SBA loans require you to have been in business for at least two years. If you are looking at a trucking loan, because the truck acts as collateral, you may qualify for more options, even if your business is new.

Can truck drivers get SBA loans?

Truck drivers who have run their own business for at least two years may qualify for certain SBA loans.

How can you start a trucking business with no money?

Finding financing for a brand-new business can be challenging, but not impossible. Some types of loans, such as short-term loans and merchant cash advances, look at factors other than time in business to qualify you. You may also consider taking out a personal loan to start your trucking business.


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