If you are presently running a trucking business, then your commercial trailer may be the most pertinent piece of commercial equipment that you use. They also tend to be quite expensive. Whether you require a fleet of top-of-the-line trucks or simply one commercial trailer, commercial vehicle financing can be of great help.
You can use trailer loans in order to save money for other, more pressing, business matters. The end goal should be to obtain the equipment that you need in order to run your business, while also conserving cash for other business ventures. Here, we will discuss everything that you need to know about commercial trailer loans.
Now is the Time
If you are thinking of securing a trailer loan, now may be the time to go for it. Leasing programs and commercial truck loans are very attractive, currently, thanks to record low interest rates this year.
How to Qualify for Trailer Loans
Each lender will have their own set of requirements. However, there are certain things that you can do in order to help your company qualify with all lenders in the industry. The first thing to focus on is obtaining all the necessary business permits or licenses that you need in order to legally run your trucking business.
You and your business partner (if applicable) may also be required to provide a personal guarantee for the trailer loan. Do not get involved until you are sure that you are financially able to provide such a guarantee.
Each bank or truck lender will have their own qualification requirements in regards to credit scores and credit histories. However, the general rule of thumb is to try and maintain a score of at least 600 (personal credit) in order to have a good chance of qualifying. You should also not have any tax liens that have gone unresolved, nor should you have any bankruptcies on your credit dossier in the last 7 years.
Still, even those with poor credit may be able to secure a trailer loan, assuming they are willing to shop around and make a few concessions. For example, you may be required to pay more in interest in order to secure the trailer loan.
What if I own a startup?
Even startups may be able to secure a trailer loan. However, because you will be seen as a riskier investment than an established business, you will likely have to pay more interest. You may also be required to put down a significant down payment in order to qualify.
Should I buy or lease?
As you begin to perform your due diligence, you will notice that most lenders will offer many leasing options. You may opt to lease the trailer for a few years before surrendering the asset to the company. Some financing companies, though, will provide you with the option to buy the commercial trailer after your lease has ended.
The biggest pro of buying a commercial trailer is that you will quickly obtain the machinery that you require while still maintaining your cash flow. The trailer that you purchase can serve as collateral, and you can sell the vehicle in a few years in order to generate some working capital if needed.
However, the biggest con of purchasing a commercial trailer is that you’ll pay more for the vehicle in the form of interest. Even worse, if your business has a poor credit score, then you will be required to pay even more to your commercial truck financing company.
As for renting, you will have to deal with a low monthly payment, and you won’t have to worry about having to sell the equipment after you are done with it. You also won’t have to worry about being stuck with an outdated piece of machinery in a few years.
The downside to leasing a commercial trailer is that you may have to make higher monthly payments if you decide to partner with a leasing company. Conversely, if you choose to buy the trailer instead, placing a down payment will usually result in lower monthly payments.
Alternative Financing Option
You may be able to get a business line of credit in order to obtain your commercial trailer. A business line of credit serves as a loan option that is quite flexible. You will be allocated a set maximum amount of capital by your lender.
Factors that will determine that maximum amount include your business credit rating as well as your cash flow. A line of credit is similar to a credit card in the sense that you can access it, make a repayment, and then tap into the line once more.
The line of credit will be repaid when you draw from the line. You will only be charged interest for the amount of the line that is tapped into. You will also have the freedom to determine how, if, and when to use the capital that you have borrowed.
As for the repayment period, it will be specified by your lender, but there will be no penalty if you decide to pay back the amount early. However, some lenders may require that you pay a monthly maintenance fee if you opt to not use your line of credit.
Secured vs. Unsecured Lines of Credit
You may also have the option to choose from either a secured or unsecured line of credit. A secured line will require that you put up one or several business or personal assets in the form of collateral. As for an unsecured line, it will not require that you put up collateral, but will also be more expensive, as the lender will be assuming more risk.
The Truck Loan Center
If you would like to obtain commercial trailer loans, then please visit our website. We specialize in invoice factoring, lines of credit, working capital, and small business loans. We can also be reached at 1-866-230-0094 to learn more about our commercial trailer loans and financing or to obtain a quote.
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