Types of semi-truck financing

Semi trucks are a key piece of equipment in a wide variety of industries. They are one of the most cost-effective ways to get goods and materials from point A to point B. But they can also be expensive, so many businesses rely on financing to purchase them.

To find the most affordable option for your business, here’s a look at the types of semi-truck loans available and their advantages and disadvantages.

Term loans

A term loan is a type of loan where you get a lump sum of cash upfront and pay it back through a series of regular payments.

An equipment loan is a special type of term loan designed specifically for buying equipment and machinery, such as a semi-truck. Equipment loans use the equipment you buy as collateral to secure the loan.

For a term loan, especially a secured one, a business could borrow $100,000 or more to cover the cost of a semi truck. Well-qualified borrowers can see rates as low as 6 percent, while businesses with poor credit might pay 30 percent or more.

Equipment lines of credit

An equipment line of credit is a type of loan that is designed to help companies buy equipment. Unlike term loans, lines of credit give you access to a pool of cash you can draw from multiple times on an as-needed basis. You can keep drawing from the line of credit until you hit the credit limit, and you only pay interest on the outstanding balance of the line of credit.

Interest rates for lines of credit tend to be higher than term loans. Loan amounts may also be lower. These factors could impact the type of truck you want to buy.

SBA loans

SBA loans are business loans insured by the U.S. Small Business Administration. This insurance helps protect lenders from losses when borrowers default, which means lenders can offer easier approvals and much larger loans, upwards of $5 million.

There are a few different SBA loan programs that you can use to buy a semi truck.

Where to get semi-truck loans

Businesses can get loans from various sources, including banks and online lenders. You can even work directly with the semi-truck dealer.

Banks and credit unions

Banks and credit unions can be a good source of funds for businesses with good credit and strong annual revenues. Banks and credit unions tend to have lower interest rates than other business lenders. But they usually have slower approval and funding times and stricter eligibility requirements.

Compare banks that offer semi-truck loans

If you’re looking for a bank that offers business loans you can use for a semi-truck purchase, consider these options.

Online lenders

If a bank or credit union denies your business loan, you still have options. Online lenders excel at quick applications and funding, with many offering same-day approvals and next-day funding. They are also typically more flexible than banks or credit unions, approving applicants with less operating history or lower credit scores.

The drawback is that business loans from online lenders carry a higher cost than brick-and-mortar institutions, especially if you have less-than-ideal credit.

Compare online lenders that offer semi-truck loans

If you think an online loan is right for you, consider these lenders.

Direct lenders

Direct lenders are lenders that are not banks and that offer loans directly to businesses without an intermediary. Typically, these companies specialize in a specific industry, such as semi-truck financing. They may also be dealers; for example, the company selling you a semi truck may also offer financing for the purchase.

Direct lenders have the benefit of being familiar with your industry, so they may be more able to work with companies that need specialized financing. But they might not offer the best deals.

Compare direct lenders that offer semi-truck loans

Here’s a look at four popular direct lenders for semi trucks.

Bottom line

Semi trucks are an expensive investment but a key tool for many businesses in many industries. Whether you need to buy a truck to help move your company’s goods around or want to get into the industry as a truck operator, financing can help you achieve your goals. There are even equipment loans for businesses in their startup phase or business owners with credit scores of 500 and above. But before you sign on the dotted line, make sure to shop around and compare offers from multiple lenders to get the best deal.

Frequently asked questions

• What is a good interest rate for a semi truck?

  Semi-truck financing can have interest rates that range from 5 percent to 30 percent or more, but the right interest rate for you will depend on factors like your credit score, time in business and annual revenue. Established businesses with good credit and a track record of strong revenue will qualify for the best rates. If you are a new business or you have bad credit, you will likely see loans with interest rates of 15 percent to 30 percent or higher.

• What credit do you need to finance a truck?

  Banks and credit unions tend to look for borrowers with strong credit scores of 670 and above. Online lenders have more relaxed requirements. It’s possible to find a lender willing to work with borrowers with scores of 500 and above.

• What is the average life of a semi truck?

  The average semi truck has a lifespan of about 750,000 miles. But this can vary with the type of truck, its components, where it operates, and the maintenance it receives. Well-maintained trucks can last for 1 million miles or more. Poorly maintained ones operating in harsh conditions can die much sooner. The typical truck drives about 45,000 miles per year, meaning a truck can last for more than 15 years.