The 5 Best Trucking Business Loans For Truckers & Startup Trucking Companies

The Small Business Administration offers several programs that provide funding for trucking companies. SBA loans are backed by the government, opening up new financing opportunities for small businesses that don’t qualify for conventional business loans. (Read our guide on everything you need to know about SBA loans if you are still learning about your options.) SBA loans for trucking companies are flexible and can be used for a number of purposes, including the purchase of a commercial truck and other equipment, business expansion, or for use as working capital for operating expenses.

SBA trucking loans options include:

• SBA 7(a) Loans: The SBA 7(a) loan program is one of the SBA’s most popular offerings. With a 7(a) loan, borrowers can receive up to $5 million to be used for almost any business purpose, including the purchase of equipment or machinery, real estate or land purchases, or even acquiring another business. Read our guide on the SBA 7(a) loan, including info on rates, terms, and eligibility.
• SBA 504 Loans: Less versatile, but still appropriate for heavy equipment, is the SBA 504 loan, which provides long-term fixed-rate financing of up to $5 million.
• SBA Microloans:  If you run a smaller trucking operation or you’re an owner-operator and you have an expense that requires $50,000 or less, the SBA microloans program may be an option for you. The average loan distributed through this program is $13,000. Funds can be used toward the purchase of machinery or equipment, working capital, or supplies.
• Veterans Advantage Loans: These loans are for servicemembers and veterans. These loans offer the same rates and terms as 7(a) loans but have reduced guarantee fees.

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 commercial 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.

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.

Getting 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 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. It’s probably not going to be something you’d buy a truck with.

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.

When used responsibly, a business credit card can be an enormous asset to a trucking business. A business credit card offers a revolving line of credit that can be used any time it’s needed. This is especially helpful when an emergency arises.

With responsible use that includes paying off (or paying down) your card each month, you’ll even be able to boost your credit score while having access to extra capital when you need it. In addition, many credit cards offer rewards programs that allow you to earn points or cash back after every qualifying purchase. Read our guide to the best business rewards programs for more information about these options.

If you have unpaid invoices affecting your cash flow, consider invoice factoring for company trucking.

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.

If you have a lower credit score due to past mistakes, there are still loan options available to you. While higher credit scores are required for SBA loans, borrowers with poor credit can qualify for other loans, including short-term options, lines of credit, and business credit cards.

In order to get the most affordable loan and the best repayment terms, it’s best to go into the application process with a solid credit score. If possible, take steps to rebuild your credit (read our article on the five ways to improve personal credit) before applying to lower your financing costs.

As an owner-operator, there are a number of loan options out there. Equipment financing or an SBA Microloan may help with the purchase of a commercial truck. Or consider a business line of credit, short-term loan, or business credit card for your everyday operational expenses.

There are many options available for trucking startup companies. The best option for borrowers with credit scores in the high 600s is a loan from the SBA. SBA loans provide low interest rates and flexible repayment terms for startups and established businesses.

Because you won’t have traditional documentation like business tax returns and financial statements, your application will need to include a detailed business plan and future financial projections. You’ll also need to prove that you have industry experience in order to qualify.

If you have a good credit score, you could also consider taking out a personal loan versus a business loan. With a personal loan, qualifying will be based on your own income and credit score, with no requirements for annual revenues, business credit score, or time in business. This is another affordable loan for borrowers that want to start their own business.

Most businesses do not qualify for startup grants. If you find a grant that you are eligible for, it’s important to note that competition will be stiff. The process for receiving a grant for truckers also doesn’t happen overnight, so if you need money for your trucking company fast, you’ll want to explore other options, including the loans mentioned in this post or other options, such as P2P lending or the best crowdfunding sites for entrepreneurs.

Yes, it is possible to get an SBA loan to start a trucking company. In particular, SBA microloans and SBA Community Advantage Loans are appropriate for startups.

Yes, trucking companies are eligible for many of the same business loans as other companies. In particular, trucking companies may benefit from equipment financing.

As with any business loan, that will depend on your time in business, revenue, and business credit. Learn more about how to get semi-truck financing today.