Semi Truck Financing For Owner-Operators

Semi Truck Financing 101

Semi truck financing helps you become your own boss, and there are many lenders that will to help semi truck buyers find a means to buy their rigs. If you want to be your own boss and either be an owner-operator or run your own fleet, this guide will help you.

Commercial Semi Truck Financing Primer

Financing for a big rig is similar to what most people are used to when buying a vehicle, but since a semi truck is used for commercial purposes, qualifying for the loan is different. We’re going to walk you through the steps you need to take to get semi truck financing.

But before we do, it’s important to ask: are you sure financing is right for you?

Should You Lease or Finance a Semi Truck?

Financing a semi truck isn’t your only option. You may want to lease a truck before making a long-term commitment. While financing is often the best option, there are times when leasing makes the most sense, including:

  1. Startups. Many startups fail, and when capital is low, you may not have the liquidity to purchase a rig through financing. Startups can choose to avoid hefty down payments and retain more of their capital by leasing.
  2. Cash flow is low. If you have low cash flow, financing and obtaining a loan can quickly deplete your working capital. Leases often have lower upfront costs and monthly payments, which may be a good option for you.
  3. Longevity concerns. If a rig is older, you may have concerns about the lifespan of the rig. Leasing may help you reduce the risks of losses due to breakdowns and allow you to finance a rig in the future.

An operating lease does have the benefit of being tax-deductible, and you don’t need to add the rig to your balance sheet.

However, if you plan to operate as an owner-operator or a fleet over the long-term, semi truck financing is the best option. After all, it’s not uncommon for many rigs to run for nearly a million miles before having any issues.

Step-by-Step How to Get a Loan for a Commercial Truck

You’ve decided to join other semi truck buyers and secure financing, but where do you even begin? First, it’s crucial to know base eligibility and truck requirements.

Financing Eligibility

Financing will depend on multiple factors, many of which change from one loan provider to the next. Common requirements include:

  • 3+ years with a CDL license if you’re not a startup
  • Down payment
  • Credit score of 600 or higher

If you have a higher down payment, it reduces the risk for the finance company, and you’ll have an easier time getting a loan. However, if you don’t have a substantial down payment, you can secure financing, but interest rates may be higher.

You’ll also need to find a truck that meets certain requirements.

Semi-truck Requirements

Again, requirements will change from one lender to the next, but many lenders will only consider semi trucks that are:

  • Less than 10 years old
  • Reading 700,000 or fewer miles
  • In good condition, requiring no major repairs
  • Sold by a reputable semi-truck dealer

Lenders want to know that the truck is in operable condition and can be sold if you fail to pay the loan. You may need to provide pictures and other documents pertaining to the rig to secure financing.

Credit Score Needed to Buy a Semi Truck

Your credit score, or your business’s score, will be taken into account when determining whether you’re qualified for a loan. However, you’ll find many lenders willing to provide loans to individuals with bumps and bruises on their credit, too.

Credit history is an indicator of your likelihood of repaying the loan.

If you have low credit, you can do a few things:

  • Lease a vehicle instead of financing
  • Provide a larger down payment
  • Pay higher payments and rates

Lenders may decide to give you a loan if you have poor credit but you also have a long track record as a trucker and hauling contracts in place. Otherwise, the lender may ask for a higher down payment or some form of collateral before approving the loan.

How Many Years is Traditional Semi Truck Financing?

Financing a semi truck can be customized to meet your unique needs. However, you’ll find that most lenders will offer financing options between 12 months and 72 months. Longer loan periods lead to higher interest over time, but monthly costs are lower.

Buying a Semi Truck Advice (New Vs Used)

New vehicles are expensive, but they come with the best safety features and a rig that, in most cases, will have lower maintenance needs in the short-term. When financing a new rig, you won’t have to provide as much information about the vehicle to the lender because they can be confident that if you default on the loan, they can recuperate their money by selling the rig.

However, if you don’t have the funds to purchase a new vehicle, you may want to consider a used rig.

New vs Used Vehicles

If you buy a used truck, you can expect to:

  • Pay less for the vehicle
  • Take on potential problems
  • Have a limited, or no, warranty
  • Inspect the vehicle thoroughly

In most circumstances, it’s best to purchase a used rig with short-term financing. Lenders want to ensure that the rig is in good operational condition and meets safety requirements, so you can expect to run into financing issues if the rig is:

  • Pushing 700,000 miles or higher
  • 10 years old or older

If the rig you’re interested in doesn’t meet these requirements, you’ll need to have proof that the vehicle is well-maintained and in good operating condition to even be considered for financing.

As a new owner-operator, it may make sense to buy a used rig because it’s more affordable and fits into your budget constraints better. However, you also need to consider the risks of buying a used rig, such as needing to perform more frequent repairs, potential major repairs occurring sooner, and older models being less safe.

While many rigs can hit a million miles or close to it, if you’re buying used, be sure to consider lightly used trucks rather than those that have extreme wear and tear.

New Vehicle Benefits

Purchasing a new rig is the right thing to do if you want peace of mind and confidence that the first few years of operation will not require major repairs. In addition, many new rigs come with top-tier warranties that will cover all major components.

You may also benefit from:

  • Easier financing options
  • Lower interest rates
  • Manufacturer financing options

Manufacturers are often willing to finance new rigs as long as you meet the requirements. If you are securing semi truck financing for a new rig, it’s best to go with a long-term loan because you can be confident that if you maintain the rig, it will continue to help you earn money throughout the loan’s lifetime.

Commercial Truck Financing Companies

Looking for the best commercial truck loans? There are many banks and lending institutions that specialize in semi truck financing and offer a variety of options, including semi truck title loans. Some of the top companies include:

U.S. Bank Truck Loan

U.S. Bank offers truck loans through their equipment financing program. Through this program, you can obtain a loan of up to $500,000. If you want faster approval, they have options for financing up to $150,000.

If you haven’t found the perfect truck yet, you can also get preapproved for up to $500,000 before you start shopping. Loan terms range from 24-60+ months.

Wells Fargo

If you’re looking for a lender that offers multiple financing options, Wells Fargo may be worth considering. They have several options for financing semi trucks, including open-ended leases, lines of credit, term loans and more. Terms for semi truck loans can range from 12-84 months.

Balboa Capital

Balboa Capital is an alternative to a conventional bank. The company offers a few options for financing commercial vehicles, including:

  • Applications for soft collateral up to $350,000
  • Applications for hard collateral up to $500,000
  • Same-day funding if approved

The application process is done online, and during their regular business hours, they offer one-hour approvals. Terms are flexible and rates are competitive.

Balboa Capital looks for applicants who have:

  • A FICO score of 620 or higher
  • At least one year in business
  • At least $100,000 in annual revenue

Bank of America

Bank of America offers semi truck financing through their equipment loans program. To qualify, you must be in business for at least two years and bring in at least $250,000 in annual revenue.

Loans are available up to $750,000 with terms of up to 60 months.

Preferred Capital Funding

Preferred Capital Funding offers loans for semi trucks up to $500,000. Rates are competitive, and they will finance a wide variety of new and used equipment. One advantage of going with this lender is that they offer 100% financing.

Applications are reviewed quickly, and you can get started online.

Firstmark Financial

Firstmark Financial offers truck and trailer financing. They also finance specialty vehicles. The application process is quick and easy. You can do it online or contact them to work with a representative.

Commercial Fleet Financing

Commercial Fleet Financing has been in business since 1995, and they specialize in financing commercial vehicles, including semi trucks. The company can deliver credit approvals in as little as two hours and release funds in as little as 24 hours. They also offer low payments and a $0 down loan option.

They do require a 640 credit score and will likely need to see your bank statements and/or tax returns when reviewing your application.

If you have a lower credit score, bankruptcy, judgments or prior liens, the company does have special options to help you get financing for your truck.

Semi Truck Financing FAQs

Can You Finance High Mile Trucks?

High mileage trucks often come at a lower price than their low-mile counterparts, but most drivers will still need financing to make their purchase. But will a lender finance a truck with high mileage? In some cases, yes.

Some lenders have no issue financing a truck with 300,000+ miles. However, loans on these types of trucks usually come with higher interest rates. Depending on the vehicle, you may wind up paying much more than the truck is worth. In this case, it may be better to wait and save a little more to purchase a newer truck with lower mileage.

Is There Semi Truck Financing for New Operators?

If you’re a new operator, you may struggle to find a lender who will extend you a loan, but that doesn’t mean that it’s impossible.

Some lenders have a first-time semi truck buyer program that may make it a little easier to finance your truck as a new operator. Other lenders may be willing to approve financing at a higher interest rate or special terms.

The biggest issue lenders will see is your lack of experience. Because you’re a new operator, you’re deemed a higher risk.

If possible, look for lenders that specialize in first-time buyers or new operators.

Do I Need a CDL to Secure Semi Truck Financing?

Not necessarily, but you’re more likely to be rejected without one. Semi truck buyers don’t necessarily have to be drivers. There are semi truck financing programs for “investor buyers,” which are buyers who don’t have their CDLs. However, there are fewer options and more restrictions when financing a semi without a commercial driver’s license.

When you apply for financing for something like a semi truck, which requires special licensing, lenders generally want the borrower to have that license. Some lenders also want you to have experience driving with a CDL.

If you’re attempting to finance a semi truck without a CDL, the lender may consider you a high risk.

Does that mean that your application will be rejected?

No, but you may have fewer options than someone with a CDL looking to finance a semi truck. For example, you may be required to obtain a CDL guarantee or apply as a fleet owner after your business is established and producing income.                                              

Semi truck financing helps the transport industry continue delivering loads and be the heart of the supply chain. If you want to be your own boss or are a start up that wants to finance the purchasing of a semi truck, you’ll find dozens of lenders willing to provide loans even if you have bad credit or lack extensive credit history.

However, you need to find ways lower the lender’s risk, and this means that you may need to provide a higher down payment or collateral if you have bad credit.