Types Of Business Loans For Truckers
If you’re in the trucking industry, there are several business loan options available for you. For the purchase of a truck, you should consider equipment financing. You may also be able to qualify for the SBA Microloans program, which provides up to $50,000 in financing for expenses.
Short-term loans, lines of credit among others are also available to you, but they usually have a higher cost.
Let's take a look at the different types of financing available to truckers to find the one that best suits their needs.
Equipment financing is exactly what it sounds like: funding that is used to purchase equipment. In the trucking industry, this could mean the purchase of a new or used truck, a trailer, or other long-term physical assets that are necessary for operations. This type of funding allows you to break down the cost of expensive equipment into smaller payments that are easier to manage.
There are two types of equipment financing:
Equipment Loans: With a loan, you’ll make scheduled payments that go toward the principal balance and interest. Once all payments have been made, the equipment is yours. If you plan to keep your equipment for many years, this is the best option for you.
Equipment Leases: When you lease equipment, you’re essentially renting from the lender. You make payments each month to be able to use the equipment. Once your lease is over, you’ll return the equipment and can upgrade to the latest model. In some cases, you may be able to pay the remaining balance if you’d like to own the equipment outright. With leases, monthly payments may be more affordable and it’s possible to find leases that don’t require a down payment. However, the total cost of the lease typically winds up being more expensive than loans due to higher interest rates.
Medium-Term Installment Loans
A medium-term installment loan is a loan that is paid off over a period of 1 to 5 years. With this type of loan, you can break down the cost of a purchase or receive working capital while repaying with low monthly payments.
Medium-term installment loans can be used for any business purpose. These loans can be used for the purchase of new equipment. You can use the funds for working capital. Loan proceeds can be used for business expansion or acquisitions. You can even use these loans to refinance existing debt.
Business Lines Of Credit
A business line of credit is similar to a credit card. A borrower has a credit limit set by the lender and can make multiple draws as needed up to and including the credit limit. With a business line of credit, you only pay interest and fees on the borrowed amount. For example, if you have a total credit line of $200,000 but have only spent $50,000, you’ll only pay interest or fees on the $50,000.
A line of credit can be used for any business expense, from unexpected emergencies to covering operational expenses or purchasing equipment.
Short-Term Business Loans
Short-term business loans are loans that are paid back over a very short period of time. This period of time varies, but it will not exceed one year.
Short-term loans are one of the most expensive forms of credit, so it is best to only use these loans when absolutely necessary. Because funding is fast (potentially as short as 24 hours), a short-term loan is best for emergency situations when time is of the essence.
Borrowers that have not been in business long or have low personal or business credit scores may have no other options than to seek a short-term loan. If this is the case, the return on investment should be calculated to determine if the loan is worth the high cost.
If you have unpaid invoices affecting your cashflow, consider invoice factoring. Invoice factoring isn’t technically a loan. Instead, you sell your unpaid invoices to a lender. The lender purchases your invoice for a discount. This discount goes to the lender for providing a fee, while the remainder of the balance goes into your pocket.
This is a great option for businesses that have multiple unpaid invoices and don’t want to seek other types of financing. Invoice factoring also has lower credit score, annual revenue, and time in business requirements, making it easy to qualify provided you have eligible invoices.
Best Loans For Trucking Companies
Not sure where to start getting a loan for your trucking company? Whether you need to buy new equipment, have credit problems, or need a flexible line of credit to improve cash flow, Amerishop Financial offers financing for trucking companies.
Consult with one of our specialists and we will guide you through this process.