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A semi-truck loan is an equipment loan that functions like an auto loan. It helps businesses to buy expensive equipment and pay it off over time. If you are unable to fully pay the semi-truck fee, or if you need to maintain cash in the reserve in the event of an emergency, you may need a semi-truck loan.
Paying $50,000-180,000 to buy a semi-truck is a huge sum to take away from your business. That capital can be used to fund other necessary purchases and maintain positive cash flow.
We’ll explore the biggest reasons to consider taking advantage of semi-truck funds and advantages and disadvantages of this type of loan.
When should you consider raising semi-truck funds?
There are several types of business loans that can be used for any purpose, including semi-trucks, but getting semi-truck funding can make more sense.
Below are some instances that you might consider financing a semi-truck rather than a traditional business loan.
You are starting a trucking business
Most business loans require you to go to business for two years to get funding approval. However, semi-truck funding companies are more generous and often accept new startups and businesses in the market for six months. You may be able to purchase semi-trucks and get a semi-truck loan that will help you develop your business.
You cannot pay for a semi truck with cash
If you don’t have the cash on hand to buy a semi-truck, a semi-truck loan can be useful. If approved, the lender will give you the price of the truck so you can purchase it. You don’t have to wait to build cash reserves to buy your own semi-truck. Instead, you can use the revenue generated from paying off the loan using a truck.
You need capital in hand for other business expenses
Perhaps you have the capital to buy semi-trucks, but doing so will drain your business savings. If you need that savings for other business expenses, or you may need them to make emergency funds available. In this case, we recommend using semi-truck financing to fund your truck purchase while you have cash on hand for business or unexpected business expenses.
You have no assets
Many lenders need to list their business assets to support business loans. But what happens if you don’t have valuable assets? Equipment loans like semi-truck loans allow you to receive funds while supporting the loan with the semi-truck you are purchasing. Semi-trucks act as built-in collateral for loans, so no additional collateral is required.
You’re not trusted
Bad credit makes it difficult to get any kind of funding, as lenders view you as a higher risk. Fortunately, semi-truck loans are not unsecured loans, as the truck itself is collateral.
If you default on a loan, the lender can grab this collateral, reducing the risk of lending to the subprime borrower. As a result, bad credit business loans for semi-trucks can be more easily protected than other types of funding if your credit score is low.
Compare semi-truck loans
Before applying for semi-truck finance, compare several lenders to find the most affordable options. Let’s take a quick look at some of the top renders offering equipment and semi-truck loans.
| Lender | explanation |
|---|---|
| SMB Compass | SMB Compass equipment loans start with interest of 5.99% and are open to businesses that have been in business for at least a year. Loans can usually be funded in 24-48 hours. If you run a full-scale trucking business, we also offer loans tailored to the transport company. |
| Triton Capital | Triton Capital equipment loans can cost up to $250,000, with fees starting at 5.99%. Generally, funds only take 1-2 business days. Startups are eligible to apply. |
| Nationwide funding | The lender’s commercial truck funding cap is $150,000. To qualify, you must be in business for at least six months and have fair credit. Funds could be made 24 hours a day. |
| Funding Circle | Funding Circle offers term loans that can be funded in two days for up to $500,000. Your company must have been open for at least two years to qualify. |
| Taycor Financial | Taycor Financial offers equipment loans ranging from $5 million to $2 million. It accepts business for just three months with little revenue. |
Pros and cons of semi-truck fundraising
Let’s take a quick look at the pros and cons of semi-truck fundraising.
Strong Points
- High-speed funding: While some banks may take some time to pay the funds, many semi-truck loans may be funded within a few days.
- Tax benefits: You can amortize your equipment purchases based on the tax deductions in Section 179.
- Helps maintain cash flow: You can keep the thousands of dollars spent on purchasing equipment and using it for other business expenses.
- Many types of borrowers have access to: Semi-truck lenders tend to be generous with their eligibility requirements and accept startups or business owners as bad credit.
Cons
- High purchase cost: Buying a semi-truck costs between $50,000 and $180,000. This is a huge business purchase.
- Higher rates and interest: Semi-truck loans may charge high interest and fees that will spike the total price of your equipment. Online lenders tend to charge higher interest rates than traditional banks.
- A down payment is required: While some lenders offer 100% funding, most people need to cut 10% to 20% of the cost of a semi-truck.
- Semi-truck will be used as collateral. Semi-trucks support the loan, so if they fail to repay, the lender can seize the truck.
Alternatives to semi-truck funding
A semi-truck loan may suit your company, but don’t apply for one until you have evaluated all the options. Alternatives to semi-truck financing include:
- Period loan: These loans offer lump sum payments that can be repaid over a fixed period, such as five years. These loans are either protected or not secured.
- Equipment Loan: An equipment loan is a term loan that uses the equipment you are purchasing as collateral for your loan. If your lender does not specifically offer semi-truck loans, you can use this option.
- Equipment Credit Line: The credit line provides a revolving fund to replenish your loan when you pay off it. This can be used to fund the purchase of equipment as well as equipment repairs.
- Small and Medium Business Management (SBA) Loans: SBA loans are partially guaranteed by US Small Business Administrators. They are designed to support small businesses that are not eligible for traditional funding. Specifically, the SBA 504 loan is used to purchase fixed assets such as semi-trucks.
- Equipment Lease: Basically, you can rent a semi-truck that can be used for the life of the lease. Leases typically do not require a down payment and the lease can include truck maintenance.
Conclusion
A semi-truck loan makes sense for your business if you need a semi-truck and can’t pay the truck in cash. These funds may be required to carry out other business operations or to make them available to meet your urgent needs.
Make sure you have a plan to manage your semi-truck loans efficiently. Before raising funds with one company, compare options, compare interest rates and fees, and don’t overpay them.
