Types of semi-truck financing
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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.
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 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.
|SBA loan program||Loan amount||Details|
|Standard 7(a) loan||Up to $5 million||
|SBA Express||Up to $500,000||
|CAPLine||Up to $5 million||
|Community Advantage||Up to $350,000||
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.
|Bank of America||
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 online loans typically have higher rates and fees 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 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.
|CAG Truck Capital||
|Truck Lenders USA||
|Commercial Fleet Financing||
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. 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
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.
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 550 and above.
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.