It’s been said many times: “Truck drivers keep America moving.” While a few ignorant folks might consider this to be hyperbole, anyone who understands freight knows how true it is. After all, 70% of the goods consumed in this country were transported in a truck. If America’s trucks were to remain idle for even just for a day, the consequences would be severe.
Currently, there are 3.5 million truck drivers in the United States. And there are 5.2 million additional workers in the trucking industry who never step into a cab. That means there are 8.7 million people who work each day to keep this industry humming. While that may sound like a big number, it’s actually inadequate. According to research, about 60,000 more drivers are needed to meet the rising demand.
Of course, few words are more beautiful to a business owner than “rising demand.” It just takes money to scale your operation accordingly. And while buying one or more trucks may be a business requirement, it’s not as simple as stopping by your local bank to get an auto loan.
Finances can be trickier for those in the trucking industry. First, as you well know, trucks are expensive. New cabs range from $130,000 to $180,000, with the trailer adding another $30,000 to $80,000. On top of the costs, trucking companies are often considered by lenders to be a risky investment.
So as you look at financing for the New Year, it’d be wise to research your options. Whether you’re looking to buy a truck, lease a truck, or repair/upgrade your current truck, it’s important to know that you have options.
First on the list is equipment financing, as it’s specifically engineered for expenses like a truck. And with maximum loan amounts reaching $5 million, it can definitely make it possible to buy that new Kenworth W990 you’ve been coveting. Or if the W990 isn’t in the cards right now, equipment financing can empower you to purchase whatever else you need to haul freight.
Equipment financing is relatively easy to qualify for because your truck will likely serve as collateral on the loan. This is great news because it means you can get a higher amount on the loan even if your credit and financial history are less than stellar. Just know that it also means your truck could be taken from you if you don’t consistently make your payments.
Whether you need a truck, trailer, or new software for your office, term loans have the flexibility to get you there. With amounts ranging from $5,000 up to $2 million, you can sometimes receive your money in just a couple of days.
With term loans, your interest rates could start around 6%. Of course, it all depends on your credit, business history, and loan amount needed. Regardless of those details, plan on the term of your loan being somewhere up to 5 years.
Short Term Loan
These loans are like term loans, but they’re built even more for speed. You can get the money you need in 24 hours, and the term will be 1–3 years.
Sounds great, right? Just know that you pay a premium for a short term loan. They have higher interest rates than a regular term loan, and the maximum amount will be lower. However, if you find yourself in need of fast cash, these loans can usually deliver.
The US Small Business Administration (SBA) offers a suite of loans with favorable rates. The secret to the borrower-friendly terms is that the SBA guarantees a large portion of the loan, which lowers the risk for lenders. Thus, you’ll find that lenders are more motivated to work with you.
On the flip side, SBA loans are quite competitive. And even when you qualify, they can also take a long time to obtain. There’s a lot of paperwork involved, and the process can sometimes last for months.
Line of Credit
If you need to make equipment purchases that have smaller price tags, consider a business line of credit. Rather than providing you with a lump sum worth millions of dollars, a line of credit gives you access to a set amount of money that you can dip into whenever necessary. And, like a credit card, you just pay for the specific amount that you use.
This revolving approach to financing is nice because it gives you flexibility. For example, if you’re in the middle of a seasonal slowdown or waiting for a lot of bills to be paid, your line of credit can help bridge the gap.
By researching your loan options now, you’ll be ready to make financing decisions in 2020. Remember that whether you’re a veteran company with hundreds of employees or are just trying to get your business up and running, there are great loan products out there for you.