For some businesses, having one or more trucks is a necessity for operations. For others, a truck may be a nice perk but not at all necessary. In either case, there are plenty of options available to you. As long as your business is relatively stable, you shouldn’t have much trouble finding financing. But there are a lot of options, and which one is right for you is going to be predicated on your particular situation.
How Does Truck Financing Work?
Fundamentally, financing a truck for your business isn’t that different from financing a car in your personal life. But commercial truck financing actually has more in common with the process of renting commercial equipment. Fortunately, getting a truck financed can be pretty easy even if you have a poor credit record or a lack of experience running a business.
That’s because the company that’s providing you with the financing treats the truck as collateral for the loan. And because that collateral is in place, you can usually get financing even if you have poor or fair credit. In situations like that, you may be required to pay some form of down payment. That could be as much as 25% if you have poor credit and/or a lack of traceable business experience, but many entrepreneurs can get full financing for the entire truck.
How long you can expect to be paying on your loan is going to be affected, perhaps dramatically, by the lifespan of your truck. Since your truck is considered as the collateral for your loan in the first place, the loan length is typically determined by the expected lifespan of the truck. That complicates things more than you might think. A brand new truck may cost you more in the long term but be reflected in a longer loan length, while a used truck may require comparatively larger monthly payments but finish up its terms more quickly.
Where Can You Get Truck Financing?
The world of finance is transitioning from traditional banks to cover a more extensive variety of different loans and financing options. In fact, bans are not especially inclined to provide financin for commercial trucks. That doesn’t mean that you can’t get a loan from a bank or a credit union, but you may need to go with a more general purpose loan if the bank doesn’t have specific commercial truck financing options.
Truck financing on a commercial level is a little different than getting a personal loan, and that can dramatically affect whether or not you want to go through a bank or a service that specializes exclusively in commercial truck financing. This type of financing can be broken down into two different forms. In a capital lease, the truck is owned outright by the lessee, but there are usually terms for buying the truck once the lease has been paid to completion. By contrast, an operating lease allows a company to list the financing as part of their operating expenses.
What About Semi-Truck Financing?
Semi-truck financing falls under a different category than traditional commercial truck financing. The extra level of wear and tear as well as the liability means that the demands from a lessee are a bit different. Since semi-trucks are more expensive and more prone to wear and tear, you can expect your financing options to cost you quite a bit more.
In fact, if you’re looking to get your own fleet up and running, you may be better off leasing your truck rather than leasing to own or getting a loan to purchase your truck outright. The added expenses will make that level of capital hard to achieve for many entrepreneurs, and an operating lease costs less and often comes with perks like periodic free maintenance. Whatever your circumstances are, Seek Business Capital () can help you better understand your options.