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Trucking Loans and Transportation Financing

As the economy improves, the energy sector expanding and with foreign trade increasing, we can expect to see continued growth in the $700 billion trucking and transportation industry for years to come, as a report by the American Trucking Association projects U.S. freight volumes should increase by nearly 30% over the next decade. In fact, the industry projects to grow so much that investors are pouring many millions of dollars into trucking and transportation in hopes of accelerating efforts to reinvent the trucking industry. According to ATA Trucking Information Reports Industry Data 2009 there were roughly 26.4 million commercial trucks registered and used for business trucking purposes (including 2.4 million Class 8 trucks 5.7 million commercial trailers). Commercial trucks registered for business accounted for nearly 25% of all trucks on U.S. roads. These trucks log nearly 398 billion miles for business purposes annually — 13.4% of miles logged by all motor vehicles.

In October 2015, a report on truck orders  showed there more than 33,000 trucking company net trailers and the for-hire trucking tonnage index went up by nearly 2%. Also in October 2015 class 5-8 vehicle orders were over 47,000 — an increase of 14% from previous month. While many people assume trucking companies are large firms, 90% of all trucking companies operate 6 or fewer trucks, and 97% of trucking and transportation companies operate less than 20 vehicles. These small trucking companies help lead the industry that employs 3 million truck drivers, and 6.8 million Americans in jobs directly-related to the trucking industry. Salaries for truck drivers have seen gains of 12% over the past year due to a national shortage of long-haul truck drivers. This is quite an increase considering national gains among all sectors was just 2.2% during that same period. A national survey of drivers wages show average pay is now $57,000 per year for long-haul truck drivers in 2015 (which is a 17% jump from the end of fiscal year 2013.

What are the Types of Commercial Trucking Companies?

  • Over-The-Road
  • Less-Than-Truck Load
  • Local/Regional
  • Owner-Operator

What Does a Trucking Company Need Financing For?

  • Semi Trucks
  • Trailers
  • Real Estate
  • Truck Storage
  • Dump Trucks
  • Tow Trucks
  • Repair and Upgrades
  • Pay Business Taxes
  • Pay Invoices
  • Meet Regulations
  • Starting a Trucking Business

What are the Financing Options for Trucking Companies?

There are a number of financing options available for trucking and transportation companies including bank term loans and business lines-of-credit, SBA loans, asset-based loans, equipment financing, mid prime alternative financing, commercial real estate loans, invoice financing and merchant cash advances.

Below we’ll take a look at the main financing options available to truckers and commercial trucking businesses.

Bank Loans for Trucking Companies

Banks obviously offer the most competitive rates and terms of all commercial loans. Banks financing facilities include term loans, lines-of-credit, equipment financing, asset-based lending, working capital solutions and other financing options.

But, traditional banks have much higher lending requirements than other lenders (especially alternative lenders). Banks require pristine business and personal credit, established cash-flow & profitability, quality business and personal collateral, and lots of financial documentation of the trailing 3 years.

  • Bank trucking loan rates: 6-10%
  • Bank trucking terms: 3-25 years (depending on use)

SBA Loans for Trucking Companies

SBA loans offer trucking and transportation companies that probably couldn’t obtain a traditional loan the ability to secure bank-rate financing through the use of the U.S. Small Business Administration’s loan guarantee program.

The SBA tries to encourage lending from traditional bank lenders, community banks and small bank lenders by agreeing to shoulder the majority of the lenders’ losses should the borrower default on the loan. In return for the loan guarantee, the SBA requires certain documents be provided and requirements be met to ensure the integrity of the lending program.

  • SBA rates for trucking companies: 6-8%
  • SBA terms for trucking companies: 7-25 years

Alternative Business Loans for Trucking Companies

For trucking companies that don’t meet traditional and SBA financing guidelines and criteria, there are alternative business loan options available including including mid prime alternative loans.

While mid prime alternative lenders don’t offer rates as low as traditional banks, they do offer rates that are much lower than many online business loans, factoring companies, and merchant cash advance lenders. On top of that their loan terms are generally much longer than advance lenders — which allows you easier debt service coverage.

A huge advantage that alternative loans offer over bank loans is how fast they are able to fund. Pre-approvals takes minutes and the entire funding process takes anywhere from 3-7 days. 

  • Alternative trucking loan rates: 6-8%
  • Alternative trucking loan terms: 7-25 years

Invoice Financing for Trucking Companies

Invoice financing (also referred to as “invoice factoring”, “invoice discounting”, “invoice finance”) is the selling of a trucking company or transportation company’s unpaid invoices to a factoring company at a discount.

Rather than taking out a loan and making daily, weekly or monthly payment during the term of the loan, trucking companies and simply sell their 30, 60 and 90 day unpaid invoices, and the factoring company will forward the trucking company between 70-92% of the unpaid invoice’s value (minus a fee for the factoring company).

Each week the invoice goes unpaid after the factor buys it, the factoring company will charge the trucking company a fee (usually 1-2% of the invoice’s value). Upon full-payment of invoice, the factoring company then forwards the trucking or transportation company the remainder of the balance. 

  • Trucking invoice Financing rates: 1-3%

Equipment Leasing for Trucking Companies

Equipment Financing and Leasing allows trucking companies to obtain new or used trucks and/or machinery without having to pay the full price of the equipment upfront.

Equipment leasing companies will purchase the new or used truck or equipment, and then lease the equipment to the trucking company for a period of years. Upon conclusion of the agreed upon term, the leasing company will then offer the trucking company the ability to buy the equipment from the leasing company, or extend the lease for a longer period.

  • Trucking equipment financing rates: 5-15%
  • Trucking equipment leasing terms: 1-7 years

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