8 Best Transportation Loans
Trucking is an industry on the consolidationnow.com go. Finding the correct financing is vital for any small company functioning long-term. Establishing, maintaining, or developing a firm requires finance.
Trucks transport almost 70% of all freight in America, totaling over 10 billion tons. And it employs around 6% of full-time employees. The $700 billion produced by the US transportation sector exceeds the GDP of 150 nations.
It’s like buying something that was transported. This is particularly true for the goods we often purchase, like groceries. If long-haul trucks were idle, shop shelves would quickly run out. That’s the maximum influence any industry can aim for.
It’s too early to determine whether truck drivers are entering a golden era, says transportation expert Sandeep Kar. A broad range of groups is already working to develop the industry in this direction, including OEMs, system suppliers, connected vehicle technology providers, lawmakers, freight brokers, and early-stage firms in computing, IT, health care, and simulation. This clearly shows that commercial vehicle product planning will continue to prioritize truck drivers for many years.
Currently, 33.8 million trucks are registered on American roadways, totaling 297.6 billion kilometers. Around 3.5 million truck drivers and 5.2 million support employees keep the sector running smoothly.
The transportation business employs about 8 million people, but more is needed. Sixty thousand drivers are required, according to research.
Pay increases naturally when there is a shortage, says Bob Costello, chief economist for the American Trucking Association. If you don’t receive a 401(k), health insurance, or paid time off, you need to change jobs.
Due to the driver scarcity, businesses must boost their products to remain competitive. If you pay low salaries and don’t provide benefits, you’ll have trouble retaining staff.
Aside from recruiting staff, there are other significant expenditures. A new taxi costs between $130,000 and $200,000. You can’t transport much unless you install an $80,000 trailer to the cab.
They say you have to spend money to earn money. Small company entrepreneurs in transportation must first manage high expenses before they can earn income.
The nuances of trucking business loans
Many entrepreneurs discover that their sector provides distinct hurdles when seeking the most acceptable transportation financing. Some previously said, high costs. Complicating matters, lenders generally see transportation firms as high-risk investments.
Whether you’re looking to fix your present truck, lease a new one, purchase your dream truck, or just obtain equipment for your fleet, you’ll want to do your homework. Don’t settle for a poor lender. You are making this choice carefully will ensure long-term success.
Not every small company loan is suitable for trucking. Here are the top 8:
1. Equipment loans
Trucking is an equipment-heavy industry, so this form of financing makes sense. The funds may purchase vehicles and support equipment for up to $5 million.
While the term equipment financing conjures thoughts of machines, the meaning is extremely wide. You may purchase new office desks, breakroom fridges, solar panels for your building, or accounting software for your PC.
Equipment financing is more accessible to qualify for than other loans since the equipment is the collateral. With good collateral, you may typically be eligible for large sums even if your credit score is low. The disadvantage of this arrangement is that the lender will seize your collateral if you fail on the loan.
2. Credit line
While large loan amounts are available for equipment financing, a line of credit is ideal for lesser costsan ongoing credit instead of a flat payment. Like a credit card, you withdraw money when you need it, pay it back, and repeat.
A company line of credit gives you incredible freedom. Need to recruit extra drivers? No issue. Renovating the office? That’s OK. Want to acquire luxury mattresses for your whole fleet? Bravo.
This kind of funding ranges from $5,000 to $500,000. You won’t have to fill out reams of paperwork or go through hoops to get the money.
3. Term loan
Like Old Faithful in finance, term loans have been around for years. Not the most flashy financing (even the name is dull), yet they give speed, convenience, and flexibility.
A term loan has set interest rates or flat costs. You lock the amount upfront, and your payments will never vary. This stability is essential for maturities up to 5 years. Save money and know the prices to determine how much you can afford firmly.
Term loans range from $200,000 to $2 million with interest rates of about 6%. The funds may be sent to your account in two days, assuring a quick turnaround.
4. Quick loan
Two days are sometimes too long. Short-term loans are often used by small enterprises in need of quick cash. They are lightning-fast, typically depositing funds within 24 hours. That’s approximately the time it takes Amazon to deliver some of their fastest deliveries.
Short-term loans are so similar to term loans that their creators merely added a short to the word. They fund quicker and provide 13 year payback schedules.
Just be aware that speed in finance generally comes at a cost. Interest rates start at about 8% and gradually increase from there. You should get approved if you have solid credit and have been in the company for a few years.
5. SBA 7(a) Loans
The SBA’s financing choices are unique since they involve a third party. SBA guarantees a percentage of each approved loan, which benefits the borrower. With fewer risks, third-party lenders may provide more liberal rates and conditions. Your company is their priority.
The SBA has historically facilitated these loans, annually linking entrepreneurs with tens of billions of dollars. They want to aid small company owners who conventional lenders have turned down. So if you’ve had financial issues, you may be eligible.
SBA loans like the 7(a) program are widely desired due to their advantages. It’s not often that you can borrow up to $5 million with such favorable conditions. But SBA loans are notorious for their paperwork. And the approval procedure might take up to three months. This period indeed renders them unfeasible for those in need of
Like term loans, SBA 7(a) loans have been around for decades. More small company owners pick this program than any other offered by the government.
They have fantastic prices and terms. It’s rare to get financing this good for those rejected by other lenders.
7(a) loans are also flexible. The money has minimal restrictions, so transportation businesses will find that most of their demands are met.
This loan program is open to profit-making businesses operating in the United States or territories that fulfill the minimum size and financial conditions. You’ll also need a sound business plan to show the lender how the funds will be used.
6. SBA Express Loans
Like short-term loans, SBA Express Loans are meant to be faster versions of 7(a) loans. Of course, calling it express is a misnomer. Even though these loans are among the agency’s quickest, they still take a month to fund.
Like accelerated loans, this financing offers less paperwork and a faster approval time. The maximum loan amount is less than a 7(a) loan.
Your credit score of 680 or above may qualify you for an SBA Express Loan. To apply, assemble your company license, personal tax records, YTD P&L statement, YTD balance sheet, and debt schedule.
Also, SBA Express Loans have harsher utilization limitations. The cash must be used to buy equipment, increase working capital, or consolidate debt.
7. SBA 504 Loans
Unlike SBA Express Loans, these loans may only be utilized for real estate purposes. You may qualify for a 504 loan if you intend to accomplish any of the following:
- Buy old buildings
- Construct land or land enhancements such as parking spaces and landscaping
- Build new facilities
- Renovate or convert existing buildings
- Buy long-term equipment
- Refinance debt to fund new or upgraded equipment or facilities
Your company’s tangible net value cannot surpass $15 million, and its typical net income cannot exceed $5 million. Before applying, make sure you satisfy the SBA’s size guidelines.
8. Loans for disasters
Disasters don’t spare trucking firms, and some company owners struggle to recover after a catastrophe. As a result, the SBA provides low-interest catastrophe loans to assist companies in recovering physically and financially.
The SBA relaxes lending criteria to help as many small company owners as possible. There are no size limits or other hurdles preventing firms from qualifying for other SBA loans.
Economic injury catastrophe loans and Home and Personal Property Loans are the four primary types of disaster loans. They’re all designed to bring you back to before the calamity. In other words, you may repair or rebuild your property but not extend it to new levels.
Your company must be situated in a presidential and SBA-designated disaster region to qualify for an SBA disaster loan. Instead of guessing, you may quickly search the SBA’s online database by state or territory.
Chosen a Win
Some trucking company owners struggle to find the best fit with so many financing alternatives available. Begin by calculating how much money you’ll need to borrow. Loans come in many forms and sizes, so having a solid amount written down is vital when considering possibilities.
Consider also when you will need the money. Some loans arrive in as little as 24 hours, while others take months. Your timeframe will help you sift out the pretenders in your quest for the best financing alternative.
After narrowing the list of loans, you may start comparing them. It’s like comparing business equipment and choosing the best quality at the best price.
The four best financial comparisons are:
- Total Capital Cost (TCC)
- APR (APR)
- Average Monthly Payment Cents
The issue is that numerous lenders provide these indicators in different ways, making it impossible to compare loans. Sometimes you need to pull out the heavy guns. SMART BoxTM is one of the quickest methods to cut through confusing language and meanings (Straightforward Metrics Around Rate and Total cost). In collaboration with several of the nation’s leading lending platforms, the Innovative Lending Platform Association developed this comparison tool.
SMART Box helps small companies to better analyze and compare loan options, says Todd McCracken, president, and CEO of the National Small Business Association.
You’ll be in the best position to pick an outstanding loan if you do your homework using resources like calculators and SMART Box. A small company loan might help you buy a new Peterbilt vehicle, expand your office, or hire seasonal workers.