If you are a new owner operator, a large motor carrier, or a private fleet operator, financing a commercial truck can be difficult.
Getting approved might seem impossible with all the requirements that banks impose on businesses.
But if you follow these five steps, you should increase your chances of getting approved for commercial truck financing.
Determine What Type of Truck You Need
When banks are deciding if they want to loan you money to buy a commercial truck, the actual type of vehicle that you are interested in makes a big difference.
For example, financing an over the road sleeper cab semi-truck is usually more difficult than local day cabs. This is because of the added risk, and the additional wear and tear that the vehicle will endure during its lifetime.
It is also true that selling a day cab is easier than selling a sleeper cab truck if the bank were to have to reposes due to non-payment. If you ensure that you really choose the right truck for your business, you can boost your odds of getting approved and most likely secure a lower interest rate as well.
Buy a New Truck
Buying a new truck is much more expensive than going used, but it can end up being cheaper. Banks are more likely to finance a new commercial truck than they are used. This is because it is less risk for them.
A new truck will have better resale value, be easier to sell, and will stay on the road more often than an old truck that breaks down a lot. This means that your truck will be on the road generating revenue to allow you to pay back the loan.
The lower repair costs and insurance premiums, as well as the lower interest rates could make a new truck a better deal than a used one, even if the price is much higher.
Close Out your Accounts Receivable
The biggest factor in determining your approval for a loan is the revenue that your business is generating. While we all want to increase revenue as fast as possible, it just isn’t realistic to increase it whenever you want.
The higher your revenue is, the more likely you are to get approved. You’ll also qualify for bigger loans, lower down payments, and lower interest rates.
A fast way to boost revenue to qualify for a larger loan is to close out your accounts receivables with customers. Get on the phone and ask them to pay sooner. It may be possible to negotiate a small discount for early payment if the cost makes it beneficial to you. Doing this allows you to book the accounts receivable as revenue to make your numbers more appealing to the bank.
Check Your Personal Credit Too
Business owners will be required to personally guarantee a commercial vehicle loan in many cases. Therefore it is important to verify that the business owner’s credit is clean just as much as the entities business credit score.
You should ensure that your personal profile is clear of errors, and you’ve maintained a steady history of full on-time payments. You’ll also want to make sure that there are no errors on your report.
Getting approved for commercial truck loans can be difficult, but following these four steps noted above should help you increase your chance of getting that approval that your business needs to succeed.