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Semi-trucks are important equipment that helps deliver goods to warehouses and businesses, but they cost between $70,000 and $200,000 to buy. Semi-truck funding helps you get semi-trucks on the road without sacrificing the cash flow of your business.
However, there are a variety of business loan options that you can use to get semi-truck funding. Learn about the different types of semi-truck loan options and consider the advantages and disadvantages of each. This will help you make the best decision for your business.
Equipment Loan
Equipment loans are special types of term loans designed specifically for purchasing equipment and machines, such as semi-trucks. Equipment loans use equipment you purchase as collateral to secure a loan. The loan amount is usually equal to the cost of the equipment and provides capital to purchase it.
Because equipment loans are protected, lenders are often willing to offer low interest rates. Qualified borrowers may see a low 6% rate, while poor credit companies may pay more than 30%.
Equipment Credit Line
A device credit line is a type of loan designed to help businesses purchase equipment. Unlike term loans, a credit line provides access to a pool of cash that can be withdrawn multiple times if necessary. You can continue to withdraw from your credit line until you reach your credit limit and pay interest only on your outstanding balance on your credit line.
Line of credit interest rates can be higher than term loans ranging from 8% to 60% or more. Depending on the lender, the amount of the loan may be limited to $100,000 or $250,000. The advantage, however, is that you may be able to use your loan for expenses other than purchasing the equipment, such as shipping, installation, and repair payments.
SBA Loan
SBA loans are business loans insured by US small business administrators. This insurance helps protect lenders from loss if the borrower is the default. This means lenders can offer easy approvals and large loans of over $5 million.
There are several different SBA loan programs that you can use to purchase semi-trucks.
| SBA Loan Program | Loan amount | detail |
|---|---|---|
| Standard 7 (a) Loan | Up to $5 million |
|
| SBA Express | Up to $500,000 |
|
| Capline | Up to $5 million |
|
Common uses for semi-truck finance
If you’re in an industry that requires semi-trucks, a reliable vehicle is essential. Funding is attractive to many companies as semi-trucks are expensive assets.
Some common uses for semi-truck finance include:
- Buy a new or used truck
- Repair or renewal assistance
- Engine overhaul
Semi-truck funding and lease
Semi-truck funding makes sense when you often need semi-trucks for your business, but don’t want to eliminate full costs in advance. It is also perfect for those who wish to hold a truck stock as an asset in their business. You can sell this later to recover your investment.
However, semi-truck leases may work better in certain scenarios such as:
- You are not eligible for semi-truck fundraising. Leasing is also a good option if you don’t meet the lender’s requirements to get funding. Most lenders want to see business, profit performance and minimum credit scores over a few months or years. Leases can give you time to build business and business credits.
- There is no down payment capital. If you make a 10% or 20% down payment for your semi-truck funding and are unable to pay any other expenses for the funding, you can get a lease. Leases usually don’t require you to spend money. Free up the money you can use to grow your business.
- You need the latest equipment. Semi-trucks can last longer, but if you want to stay in a new semi-truck, you can choose to lease them. You may not want to deal with maintaining a second-hand semi-truck that may require repairs or maintenance. The lease may come with a maintenance package. This will help you repair your truck without many out-of-pocket costs if it breaks down.
Alternatives to semi-truck funding
While there are benefits to getting a semi-truck loan, this type of funding is not suitable for all businesses. Instead, you can choose from these alternatives to semi-track finance.
- Credit business line. Usually, the business line of credit is spinning. This means that your credit line will be replenished when you pay back what you spend. Normally you can use a credit line for business expenses, but in many cases there is a lower credit limit than other types of business loans.
- Period loan. With a term loan, you pay the lump sum up payment and repay it through a series of recurring payments. Term loans can be used for almost any business needs, as they are not protected or protected. Term loan repayment terms vary, often ranging from several months to five years or more.
- Invoice funding. If your business collects invoices from customers, you can use invoice funding to receive up to 90% of your invoice. The customer then pays the loan back when they pay the funding fee in addition to the invoice. If you choose invoice factoring, the factoring company collects the invoices.
Conclusion
Semi-trucks are expensive investments, but are an important tool for many companies in many industries. Whether you need to buy a truck to help move your company’s products or want to enter the industry as a truck operator, fundraising can help you achieve your goals.
There are several types of semi-truck loans that can be used, including equipment loans, equipment credit lines, SBA loans, and semi-truck leases. However, before signing on the dotted line, make sure to compare offers from multiple lenders to get the best deal.
