Author: Keystone Equipment Finance Corp.
To start or grow your trucking business, you need trucks and trailers. Most small trucking companies don’t have the necessary cash to buy the assets required to run a successful business. So how do you pay for the equipment you need? You finance it.
Equipment financing can be daunting, but it doesn’t have to be. Below are five ways you can prepare yourself and make truck financing and trailer financing easier.
- Understand your purchase – what you are buying, why you are buying, how the equipment will be used
- Determine the monthly payment you can afford
- Find a lender that understands your business and your equipment
- Have your paperwork ready – invoice, tax returns, bank statements, CDL
- Be up front with your lender about your credit history
Determine the Monthly Payment You Can Afford
Understanding how much you can afford in a monthly payment will help you evaluate your purchase options and help you discuss loan terms with your lender.
The four main factors that determine monthly payment are: 1) amount financed, 2) down payment amount, 3) term, 4) interest rate. Down payments often range from 10-30%. Term length varies by equipment type. Typically, new equipment is financed for 60 months and used equipment for 36 months. Interest rate is based on risk and market conditions. Newer companies or individuals with lower credit scores will pay higher interest rates.
Keep in mind that in addition to the monthly loan payments, you will need to consider associated costs, including insurance, taxes, maintenance, and operating costs such as driver salary and fuel.
As you evaluate your total monthly expenses, take into account the additional income your equipment will contribute to your bottom line. Ensure that the additional income will be more than your monthly loan payments and operating costs.
Find a Lender that Understands Your Business and Your Equipment
Lenders are not all alike. As an owner operator or head of a small trucking company, you should look for a lender that has experience financing the trucks and trailers you are purchasing. The knowledge and expertise of an industry-savvy finance company can help speed up the financing process because the credit team understands the equipment and can ask the questions necessary to move the process forward.
Have Your Paperwork Ready
To help the financing process go smoothly, it’s beneficial to have all your paperwork ready when you submit your financing application. Most lenders need a completed credit application, the source of your haul (load board, direct contract, etc.), the invoice for the equipment you are purchasing, and either tax returns or bank statements. The sooner you get the information to the lender, the quicker they can render a credit decision. Delays in getting the requested information to the credit team only slows the process. With the right lender and organized paperwork, you should expect to have an answer within a day.
Be Honest with Your Lender About Your Credit History
Most lenders understand that many owner operators or small companies may not have pristine credit histories. Credit issues can include bankruptcies or business losses; prior or current litigation; tax liens; and more. But credit hiccups don’t need to derail the process or keep you from qualifying for a loan.
As the underwriting team reviews your information, any issues will come to light. The key to overcoming credit problems is to be upfront with your lender. This allows you to explain the situation and describe how you have addressed the problem. It also allows the lender to structure a transaction that best meets your needs.
Financing is a great way to obtain the equipment you need to start or grow your trucking business. Keystone Equipment Financing Corp. understands the trucking business and the needs of owner operators and small trucking companies. We’ve helped tens of thousands of companies purchase the equipment they need to successfully run their transportation businesses and keep them running.
Visit the Keystone Equipment Finance Corp. website, or apply now.