It doesn’t matter whether the economy is on an upswing or not, people and businesses will always need a way to transport goods. Subsequently, owning a freight trucking business can be very profitable for you.
From time to time, you’ll need to eat into some of those profits in order to repair or even replace your trucks. Moreover, careless employees may damage equipment or even quit unexpectedly and leave your freight business struggling financially.
When needs compete with profits, it’s time to consider a business loan.
Types of Loans for Trucking Businesses
Trucking business owners must think about their credit history, business history, cash-flow and repayment time-frame.
Small Business Loan
This type of secured loan is backed by government agencies and provided by private lenders. Interest rates are usually below 10 percent. For trucking companies needing to purchase multiple trucks or pay for expansions, a small business loan is a good option. Repayment terms can last up to 20 years, and it is possible to finance a considerable amount of money.
Merchant Cash Advance
For a sudden financial emergency, a cash advance is a good option. Fees can run very high so this form of financing only makes sense if it can be quickly repaid. The main benefit of this type of loan is having the cash instantly regardless of credit history. Use a merchant cash advance only for emergencies.
Working Capital Loan
Regular income is considered the collateral asset with this secured loan. For this reason, you don’t necessarily need to have perfect credit in order to get approved. With interest rates typically falling somewhere between 5 percent and 7 percent, trucking businesses can benefit from a short-term working capital loan.
Line of Credit
If a trucking company wants financing without pledging collateral, a line of credit is a good option. Interest rates may vary, but it’s possible to receive up to $200,000 in funds.
Qualifying for A Trucking Business Loan
In high-risk industries like freight transport, acquiring loan funds can be notoriously difficult. Common obstacles faced by trucking business owners seeking a loan may include the following:
It’s extremely important to have adequate and updated insurance on all trucks and inventory. Not only is this going to mitigate your business risk, but lenders are more likely to offer business loans to trucking companies that have great insurance.
Monthly Revenue Minimums
For optimal financing options, you’ll want to show a minimum of about $8,000 in revenue each month. This is important for almost all types of loans: you must demonstrate your ability to repay the loan.
Business Credit History
It’s also important that you’ve been in business for at least 6 months because an established business history helps tremendously.
Trucking businesses that meet these qualification criteria can receive financing very quickly. Even if your business doesn’t meet all of the requirements listed above, you should be able to obtain a personal loan for business with decent personal credit.