Commercial Truck Financing [Updated 2019 Guide]

How to get financing for semi trucks, dump trucks, tow trucks, and more!

Commercial truck financing is a smart way for businesses and professional drivers to obtain a wide range of heavy duty vehicles without paying large expenses upfront. Instead of buying commercial trucks outright – which is far beyond the budget of many – specialized financing companies are willing to lend money that can be paid back in set installments with interest.

This guide covers the commercial truck financing process from start to finish and also provides specific information for each industry (including semi truck financing rates), so whether it’s a semi truck, dump truck, tow truck, or any other type of commercial truck, you’ll be fully prepared to get financed!

There are three main components to financing any type of commercial truck, and all of them play a role in determining monthly truck payments:

  • Down Payment – A portion of the vehicle’s total worth that’s paid up front.
  • Interest Rate – Finance companies charge a small percentage on top of the loan that also must be paid off over time.
  • Loan Term – The total amount of time given to pay off the vehicle along with the interest.
Financing Paperwork Before signing anything, know what to expect, what to ask, and what to watch out for with this guide!

Down Payments

Most financing companies require a down payment, and paying more on a down payment can lower future payment installments. However, the down payment also has to be low enough that business operations can continue.

Let’s illustrate the importance of down payments using semi truck financing rates as an example.

A new semi truck costs about $150,000. Therefore, a finance company asking for a 5% down payment wants $7,500 up front, while a finance company asking for a 15% down payment wants $22,500. That’s a down payment difference of $15,000.

For a fleet owner, going with a 5% down payment over a 15% down payment in this situation could make the difference between being able to fuel their vehicles for that month. Or, for a professional driver, it’s the difference of well over a month’s pay.

Always do the math when calculating down payments!

Semi Truck Financing

Interest Rates & Loan Terms

The longer your loan term is, the lower the payment installments will be. However, the longer the loan term is, the more interest will accrue, thus increasing the total amount you’ll need to pay until the vehicle is yours.

To illustrate, let’s use the same semi truck financing example as before (a new semi truck with a price tag of $150,0000). Let’s say that you’ve made a down payment of 10% ($15,000) and have an interest rate of 5%.

If the term length is 3 years:

  • Monthly Payments: About $4,000
  • Total Interest: Over $10,000

If the term length is 5 years:

  • Monthly Payments: About $2,500
  • Total Interest: Nearly $18,000 (almost double)

While you could lower your payments by spreading them out with a longer loan term, it’s generally more advisable to aggressively pay off the financing agreement as fast as possible without cutting into the cost of day-to-day business operations like fuel and maintenance. That way, you can get the vehicle you need while paying minimum interest (which can save you thousands in the end).

Articulated Dump Truck Commercial truck financing is for many vehicles besides semi trucks.

What do Commercial Truck Financing Companies Look For?

Financing companies always look for this information about the vehicle itself when determining rates:

  • Age

    The newer the vehicle is, the easier it is to finance. Newer vehicles have less problems and are more likely to earn back the money needed to pay them off. They will also sell for a better price in case they are repossessed and go to auction. As a general rule, banks won’t finance commercial trucks that are older than 7 years (but financing companies will).

  • Condition

    Financing companies want to know the condition of a vehicle for the same reasons as knowing its age.

  • Total Value of Vehicle

    This will help determine the down payment and other important factors.

You can satisfy this information by sending paperwork that verifies:

  • The make and model
  • Year
  • Serial Number
  • If it was bought new or used
  • If it was from a dealership or a private sale
  • 3 pictures clearly showing the condition of the commercial truck

In addition, financing companies are also looking for information about the borrower themselves:

  • Business History

    Most financing companies prefer commercial trucking businesses that are at least two years old, especially with semi truck financing (where two years in business is considered a long time).

  • Multiple Accounts

    Numerous high-standing business accounts that have been open for a long time indicate that you are a reliable borrower who can be trusted. Business accounts with little activity, however, are generally a red flag and can increase rates.

  • Revenue

    A trucking business that has demonstrated its earning potential will have an easier time getting fully financed.

    • The more you want to borrow, the more your business should be able to reliably earn.
    • Ask your lender how much revenue they want to see.
    • Banks tend to prefer a year-round business to seasonal ones, but commercial vehicle financing companies are more understanding.
  • Business Credit

    A business carries a separate credit score that’s different from an actual person’s, and it needs to be good to qualify for the best rates. Late payments and bankruptcies could raise rates or even be a reason to get denied by banks (financing companies, however, tend to be more lenient and will still work with you).

  • Personal Credit

    If you are a professional driver (owner operator), financing companies will use your personal credit score to help determine rates.

  • Insurance

    Financing companies will pre-approve you without showing insurance, but the money will not reach your bank account until proof of insurance is shown.

  • Commercial Driver’s License (CDL)

    Sometimes a license may be required, though not always.

  • Cash Reserves (optional)

    Financing companies feel more comfortable doing business with anyone who can demonstrate that they have at least one month’s worth of cash on-hand to deal with repairs, insurance costs, and any other expenses during times of low income.

Business Financial Records What financing companies want to see from your business records.

How to Verify Your Business to Commercial Truck Financers

There are multiple ways to prove the value of your business to lenders and get financing:

  • LLCs, Corporations

    Lenders can look up LLCs and corporations through their state’s Secretary of State website for verification. Of course, you have to register first.

  • Sole Proprietorships

    This term simply means that you own the business and are responsible for its debts. You may use your Schedule C tax filings to prove that you are a legitimate business. Tip: For brand new businesses, apply for an Employer Identification Number (EIN) along with a Doing Business As (DBA) application (which lets you officially declare a name for your business).

  • Partnerships

    If you are in a partnership, you can submit a Schedule K-1 to show how the profits and losses have been divided amongst owners.

Register Business Registering your business online is a quick way to verify yourself to financing companies.

How to Find Commercial Truck Financing with Bad Credit or No Credit

A common problem, especially for startup businesses, is getting financed with little or no credit history. Fortunately, credit scores determine rates more than they do overall eligibility. In other words, you can still find plenty of financing with no credit or bad credit.

This is especially true for semi truck financing. Bad credit or a lack of credit can usually be offset by higher down payments (known as “in-house semi truck financing”, these down payments are typically between 10% to 25%) and collateral in the form of home equity or other vehicles. Certain companies offer semi truck financing with no down payments and no credit check semi truck financing programs for rates that are much higher than normal.

Even independent drivers can still get financed with a subpar credit score. An owner operator who needs a semi truck and can afford a 25% down payment for $40,000 or less of financing will probably be able to get it, regardless of bad credit.

In summary, you’ll pay higher rates with bad credit or no credit, but at least you can still get the heavy duty vehicles you need.

Another popular way to get financed with bad credit is to have someone with good credit cosign for you, though usually they have to be a blood relative for this to happen.

Financing Approval In-house semi truck financing is a viable way to get approved in a difficult industry.

Owner Operator Financing Rates Versus Business Financing Rates

An owner operator (professional driver) generally has a more difficult time getting financed than a business does. Owner operators only have one truck as opposed to a fleet, so if they have any problems with the truck, then they are much less likely to be able to earn their money back. Some financing companies will not work with people who have less than three vehicles for this reason while others will (usually for a higher down payment than a business has to pay).

A general rule for owner operators to get approved for financing is to pick a commercial truck that has no more than 700,000 miles on it and is also in good condition.

Here are three basic scenarios where owner operators can get a decent financing agreement:

  • With a credit score of 660 or higher and a down payment between 10% and 20%, an owner operator should be able to get commercial truck financing for a vehicle that’s up to 10 years old.
  • With average credit and at least $7,500 in cash reserves, an owner operator can probably get a commercial truck with under 700,000 miles for a down payment of 10% to 15%.
  • Otherwise, enough home equity or other collateral can offset bad credit scores.

Dump Truck Financing

Dump truck financing costs at least $15,000 (for a dump truck that’s about 20 years old or more), while dump trucks that are less than 5 years old generally run for $100,000.

Let’s say that you are a 2-year-old business seeking $25,000 for a dump truck:

  • Perfect Credit (750 or higher):
    • 24-Month Agreement: $1,175 per month
    • 60-Month Agreement: $550 per month
  • Average Credit (650 to 679):
    • 24-Month Agreement: $1,275 per month
    • 60-Month Agreement: $600 per month
  • Below Average Credit (620 to 649)
    • 24-Month Agreement: 1,425 per month
    • 60-Month Agreement: $750 per month

New businesses under two years with an average credit score may have to pay $650 to $700 a month for every $25,000 financed, and maybe around $1,100 if they have bad credit.

Tow Truck Financing

Towing companies that are at least two years old and have good credit can usually get away with a down payment of 10% or less. Newer businesses and businesses with bad credit can expect to pay as much as 50% of the cost as a down payment (this can be further reduced by offering collateral).

Let’s use a $40,000 tow truck as an example:

  • For a business with excellent credit, good income and has been around for 3 years:
    • 24-Month Finance Agreement: $1,900 per month
    • 60-Month Finance Agreement: $915 per month
  • For a business with bad credit that has not been around for long:
    • 24-Month Finance Agreement: $2,750 per month
    • 60-Month Finance Agreement: $1,760 per month
Rollback Tow Truck Tow trucks are easier to finance than semi trucks.

Banks vs. Financing Companies

Most banks won’t offer semi truck financing. Commercial hauling trucks break down often and have a lot of competitors, which means that banks are usually not interested in taking the risk. Commercial truck financing companies, however, certainly are.

Aside from being the only way to finance semi trucks, working with financing companies who specialize in commercial trucks are generally better than banks because of:

  • Faster Approvals

    Companies who only deal with commercial trucks know what business documents to look for and will be able to quickly appraise commercial trucks much faster than a bank.

  • Lower Down Payments

    General lending institutions don’t understand the commercial trucking business and often require outrageous down payments to offset the perceived risk. Special commercial truck financing companies can offer down payments that are much cheaper.

  • Lower Collateral

    Banks can request up to 50% of your home equity or other collateral, whereas financing companies are usually much more reasonable.

Get Commercial Truck Financing Today

If you are in need of immediate financing, we encourage you to fill out an application with our concierge financing by Taycor Financial. Taycor Financial has been a part of business growth and development for nearly 30 years. Our customers are on Main Street, not Wall Street, and our mission statement reflects that. Their goal is to provide first-class service and a full range of financial products ranging from equipment leasing and financing to hybrid lines of credit and working capital. Whether you are a startup business or a well-established landmark in your community, Taycor has multiple financing programs that will fit your business needs. Apply for financing online or by calling (888) 585-3628.

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About Kyler Richman
Kyler is a reporter and staff writer at My Little Salesman.
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