Top 4 Business Loans for Commercial Trucking Companies

Business Loans

The COVID-19 pandemic has greatly affected the trucking industry in the United States.

Potential market bankruptcies, reduced demand and truck plant closures are just a few of the major concerns commercial trucking companies all over the country are currently facing.

As the world continues to grapple with the coronavirus pandemic, business owners need to think outside the box. One of the most effective ways for trucking companies, in particular, to remain competitive and profitable in this new economic climate is to apply for business loans for commercial trucking companies.

What is a Business Loan for Commercial Trucking Companies?

A trucking business loan is the amount of money a commercial trucking company borrows in order to meet business expenses. Generally, business owners can use a truck loan for:

  • Scaling the company
  • Covering pending freight invoices
  • Marketing and advertising
  • Routine and unexpected truck maintenance and repairs
  • Acquiring necessary permits and licenses
  • Buying insurance
  • Purchasing or leasing trucking equipment like trucks, trailers, etc.
  • Paying for expenses associated with starting a trucking business

Best Loan Options for Commercial Trucking Companies

Having several financing solutions available to you can sometimes be overwhelming. You want to make sure you’re choosing the one that’s best for your business. So how do you do this?

Once you’ve assessed what your specific business needs are, you need to research each loan option. The more you familiarize yourself with what you can expect from each type of loan, the more informed your decision will be.

We’re here to help with the research process. Here’s a breakdown of four common types of business loans for commercial trucking companies:

1. Business Line of Credit

Trucking companies incur a number of variable costs each month. This term refers to the money that’s spent operating the company’s trucks. This includes fuel, repairs, maintenance, meals and driver lodging, among other on-road expenses that can vary greatly from month to month.

Because these costs can range significantly, it can be challenging to create an accurate budget for your trucking business. A business line of credit gives you enough spending flexibility to address the inconsistent costs of trucking operations.

Lenders will give you access to a predetermined amount of capital – a credit limit – that you can use as needed. The value of your credit limit and the terms of the loan depend on several factors, such as your company’s market value, profitability and credit history.

A business line of credit also has flexible repayment terms. Unlike traditional loan options where you’re expected to repay the lump sum given to you, a business line of credit only requires you to pay back the money you’ve withdrawn, plus interest. 

2. SBA Loan

Small business owners have a hard time qualifying for bank loans, which is why the Small Business Administration (SBA) created SBA loan programs to help small business owners obtain bank-rate financing. The SBA increases your chances of approval by covering up to 85% of the total business loan amounts, including SBA loans for trucking companies.

This means that even if you default on the loan, lenders will still get paid. This guarantee incentivizes lenders to extend financing to small businesses.

An SBA loan is an attractive option for small business owners because of its longer repayment terms, higher loan limits, and lower interest rates compared to other business loans. However, qualifying for an SBA loan can be quite challenging. You’ll need to be a strong borrower with an excellent credit history and a profitable business.

You can use an SBA loan for almost any business purpose, including buying out a competitor, opening a new location, purchasing new trucks and paying for daily business expenses.

3. Short-Term Business Loans

A short-term business loan is best used to address short-term trucking expenses, like unexpected repairs and maintenance. Like a classic term loan, lenders will give you a lump sum. However, you’ll be able to receive the money within a few days rather than several weeks or months. This makes it possible for business owners to quickly take advantage of business opportunities to fuel growth.

Short-term business loans look beyond the borrower’s credit history and collateral, but the convenience and speed of funding do come at a cost. Short-term loans have higher interest rates and the loan limits are generally lower than a long-term loan.

The repayment terms only range between a few months to two years. If you choose to apply for a short-term loan, make sure you are able to repay the loan on time. Otherwise, the cost of the loan can quickly accumulate.

4. Equipment Financing

A commercial trucking company is reliant on the equipment it uses to operate. In addition to the trucks, other types of needed equipment include:

  • Trollies
  • Vehicle jacks
  • Computers
  • Office equipment
  • Forklifts
  • Different types of trailers (flatbeds, dry vans, refrigerated trailers, etc.)

Equipment financing provides business owners with the working capital necessary to purchase or lease vehicles, office equipment and machinery. It’s easy to qualify for equipment financing as the vehicle purchased through the financing serves as collateral for the loan. The lender’s risk is lower because they can repossess the equipment if you fail to repay the loan.

Grow Your Commercial Trucking Company Today!

Even under this new economic climate, running a trucking company can still be a profitable venture. Without trucking transportation, the costs of moving goods from point A to point B would significantly increase.

Applying for additional working capital allows you to achieve your goals and pursue your long-term business growth.