There’s always a need to transport goods from point A to point B. It’s no wonder why the trucking and transportation industry are one of the largest industries in the country. With the right trucking and transportation business loans, running a transportation business can be very profitable. You can use the funds from the loan to purchase vehicles, repair trucks, compensate drivers, and more.
There are different types of trucking and transportation business loans and finding the right one for your business can be overwhelming. The right type of loan for your company depends on numerous factors: your credit score, interest rates, business history, intended use of the funds, and so on. To help you get started, here are four types of trucking and transportation business loans you can choose from.
1. Short-Term Loans
Short-term business loans are best for companies looking to expand their business and/or finance short-term expenses. The repayment terms for term loans often range from a few months to a year. You can use the funds from the loan for almost every type of business need, such as purchasing new vehicles, fulfilling customer demands, and making payroll. Depending on the lender you’re working with, you can choose to secure the loan with collateral or not. However, term loans secured by collateral offer longer repayment terms because reduces the lender’s risks.
2. SBA Loans
Most traditional lenders think that the trucking and transportation industry is risky, which is why most of them are hesitant to loan money to transportation companies. The Small Business Administration (SBA) stepped in to provide bank rate financing for small business owners that don’t qualify for traditional loans. The SBA lowers the risk by guaranteeing up to 85% of the loan.
The SBA 7(a) loan program is one of the most sought-after loans offered by the SBA. You can borrow up to $5 million which you can use for almost any business purpose, including paying for unforeseen expenses, purchase of equipment and machinery, real estate, and more.
Another popular SBA loan option is the SBA microloans program. It’s best for small trucking companies that need $50,000 or less, but the average loan distributed is around $13,000. Just like the 7(a) loans, you can use the funds for almost any type of purchase.
3. Equipment Financing
As the name suggests, equipment financing is the best loan program for transportation companies looking to purchase equipment for their business. Most business owners use the loan to purchase expensive equipment because it’s a long-term financing option with competitive interest rates. You don’t have to put up personal or business assets to secure the loan because the equipment you’re looking to purchase serves as collateral for the loan. For this reason, lenders can offer lower interest rates and longer repayment terms. But in order to qualify, most lenders will ask you to make a down payment. If you don’t have enough capital for a down payment, you may want to check out equipment leasing instead.
4. Business Line of Credit
Many business owners use a business line of credit (LOC) to fund the growth of their business while having sufficient cash for emergency expenses. Lenders assign you to a predetermined credit limit where you can withdraw funds from as needed. You’ll only have to repay the amount you’ve withdrawn plus the interest. This type of funding is revolving, which means you can borrow and repay continually without having to reapply. A business LOC is great for transportation companies that require the flexibility of funding. You can use your credit line to pay for daily expenses, as well as unforeseen costs of running your company.
Discover Trucking and Transportation Business Loans for Your Company
You can apply for short-term financing, SBA loans, equipment financing, and business line of credit through traditional lenders (banks and credit unions) or alternative lenders (non-bank lenders or online lenders). However, keep in mind that traditional lenders take more time (at least two to four weeks) to approve and fund your loan. Furthermore, most traditional lenders refuse to lend to risky industries, such as transportation businesses.
For a faster and more convenient application process, you can apply for any of these loans from an alternative lender. SMB Compass offers trucking and transportation business loans for transportation companies all over the United States.
Video – What is Logistics?
Logistics, making sure that everything is in the right place at the right time, is a major part of the trucking business.