This post was last updated on July 20th, 2019
Semi truck financing is different than going to your local auto dealer and securing an auto loan. Local banks don’t offer semi-truck financing, and even the banks that provide small business loans are reluctant to finance semi trucks.
Trucking, as a business, is a major risk for lenders.
Traditionally, the failure rate of a trucking company is high – it’s too risky for lenders. But there are lenders that are willing to take the risk. Semi-trucks can be seen on all major highways, so someone is financing these purchases.
Small agencies often fill the void that large lenders are leaving open. These smaller agencies provide financing options for:
- Semi trucks
- Box trucks
Basically, business-related vehicles are financed through a lot of these smaller agencies that want to help local businesses succeed.
Truck Finance Requirements
Truck financing is stringent, and you’ll need to have good credit to be approved. Lenders that are in this field already take on a lot of risk, so the lender will have their own set of requirements before financing your semi.
You’ll want to start with getting your own credit report.
The goal is to see what type of credit you have. Someone with a score in the 500s is unlikely to have the credit for a semi truck. I recommend requesting a free credit score report .
What will you learn from your report?
Well, you’ll be able to have a better understanding of how good or bad your credit score is. A lot of potential owners want to know how to buy a tractor trailer with bad credit, and the answer is a simple one: money down.
A borrower with impeccable credit may qualify for as little as 0% down when financing their vehicle.
Borrowers with bad credit?
You’re a risk. Lenders can only offset the risk that you’ll not pay for your loan through strict requirements on your deposit. You can expect to pay between 10% and 30% down on your truck. Even borrowers with great credit often pay between this range because there is a lot of risk involved with lending money for a semi truck.
And if you’re late making your payments, you can expect the lender to call you and go through repossession much faster than a traditional vehicle.
You not only need to come up with a good down payment, but you’ll also need to be diligent with your payments.
Lenders aren’t afraid to send out a repo man even if you’re only a few days late on your payment.
Requirements vary from lender to lender.
Some lenders will require:
- Annual revenue of $150,000
- 2+ year business age
- 620 or higher FICO score
Other lenders will have barely any requirements in terms of business age and revenue. Owner-operators that already have years of experience being a trucker will have a much easier time securing semi truck financing than someone that just got their CDL.
Again, it’s a risk factor that a lot of financing companies rather not deal with.
A few of the requirements from some companies that are different than what you would expect are:
- No recent repossessions
- No late or overdue child support payments
- No open collections
- No recent bankruptcies
You’ll need to take all of this into consideration when applying for a loan. The lender can have any requirements that they see fit. Some will outright state that they will not work with borrowers that have bumps and bruises on their credit.
If you have bumps and bruises, you’ll want to look further into the financing rates to see what the best rate you can get will be.
Commercial Truck Loans & Financing Rates
Commercial truck loans and rates vary from one company to the next. You’ll find every company is different. The down payment will vary from 0% to 30% in extreme cases. If you have issues with your credit, the lender will adjust your down payment to a rate that they feel justifies the risk.
In terms of financing rates, this is another varying factor.
Direct Capital, for example, provides small businesses with the capital they need for everything from trucks to inventory. The company provides loans between $10,000 and $150,000, and their rates are right out in the open:
- As low as 5.49%
- As high as 24.90% (short-term loan)
- Median of 22% (short-term loan)
Loan terms also vary from 12 months to 72 months.
You’ll want to find a company that can guarantee fixed monthly payments so that you have an idea of what you’ll be paying every month. Variable rates may be lower some months, but you may also have a much higher commitment in other months. You’ll never truly know what your bills will be month-to-month.
Semi Truck Financing Companies
Financing companies come and go in the industry, but there are a few that have remained the same for years. The financing companies that I am about to talk about have a well-known reputation in the industry.
These are the semi-truck financing companies that have helped truckers start their own operations for decades.
A few of the best-known lenders in the industry are:
Direct Capital is a lender that a lot of small businesses know and trust. When working with the company, you’ll need to secure a loan for equipment, and these loans can be up to $250,000. Rates will vary from product to product, so you’ll want to contact the company to better understand the rates that you’ll be paying.
Terms will vary from six months for a short-term loan up to 84 months for larger loans.
Funding is provided same-day.
Freedom Truck Finance
Freedom is a company that wants truckers to find success. But the company is also quiet on their rates and requirements. You will likely need a co-signer, but the company deals with just truck financing – so they’re known to be a reliable source for the would-be trucker that needs financing.
CAG Truck Capital
CAG has been helping truckers get behind the wheel of their own rig for over 30 years. The company is not a broker, they lend their own money, which makes requirements a little looser. Rates vary with the lender, but they’re willing to work with borrowers that have challenging credit, bankruptcy and even start-ups.
Lone Mountain truck leasing will finance all of your leases through Cresco Capital. The company only works with semi truck financing, so while they do consider your credit, they’ll also consider:
- Work history
There’s also in-house semi truck financing. Some carriers will be willing to finance the purchase of your first vehicle. You’ll find that this type of financing is often easier to obtain, but you may have additional commitments.
You may have to pay back the loan faster, and the rates for an in-house loan may be much higher, too.
But it’s an option from an employer that may be able to get you behind the wheel of your own semi-truck. The key most important thing is ensuring that you do your research and compare rates with companies.
There’s a massive shortage in truckers, so lenders are often more willing to work with truckers that have experience and can start hauling loads. You have options when trying to finance your own semi-truck – it’s how almost every owner-operator started their own business.