Your trucking company deals with a lot of expenses. Maintaining your fleet, fueling up for transportation, commercial insurance, replacing outdated equipment, and making repairs all add up. And to complicate things, money from invoices doesn’t always come in soon enough to cover your bills.
If an emergency strikes, it could lead to a downward spiral of debt that does a number on your credit score.
Getting back on track after your business takes a hit can be tricky, but you’re not quite out of luck. You just have to know where to look for trucking business loans and the best choices for companies with bad credit.
Understanding Your Credit Score
Your credit score is a number, usually from 300 to 850, that’s determined by your credit history and how you’ve managed credit/debt over time. A high credit score indicates a responsible borrower, whereas a low credit score shows that a borrower mismanaged credit at some point over time.
Your credit score is calculated by:
How many credit accounts you have
How long they’ve been open
Your history of making timely payments
Your current account balances
Any delinquencies/bankruptcies attached to your name
Lenders use credit scores to evaluate the likelihood of a potential borrower repaying their loan. A high score indicates that you’re a “credit-worthy” borrower, which yields more favorable interest rates, terms, and products. A low score may prevent you from working with a few lenders, but there are options for borrowers with less than favorable FICO scores.
Is it Hard to Get a Business Loan for Trucking Companies?
If you’ve applied for a loan in the past, you know lenders aren’t exactly eager to grant financing to trucking companies. Trucking is a dangerous business involving a lot of risks, including:
Accidents
Distracted driving
Road fatigue
An aging workforce
Likely due in part to these factors, the 2017 Travelers Risk Index reported 45% of transportation lenders saw their risk levels increasing. Shaky credit history or a low credit score adds more uncertainty, as it may indicate a pattern of missed payments, poor spending habits, or overutilization of credit.
Despite these challenges, it’s still possible for trucking companies to finance their growth. You might receive a few denied applications along the way, but remember that all it takes is the right lender. If you want to find that lender as fast as possible, consider working with a marketplace, like National Business Capital, that can help you apply to multiple lenders with one application.
The Best Way to Find All of Your Options
You can’t really blame lenders – who are business owners just like you – for not wanting to finance high-risk loans. Still, you also can’t go without the money you need to keep your company going.
Bad credit shouldn’t prevent you from getting funding to buy new vehicles, upgrade your technology, hire more staff members, or invest in improved route planning tools.
Alternative lenders like National Business Capital recognize the difficulties you face as the owner of a trucking business and understand that a low credit score doesn’t always tell the whole story. By considering more than just a FICO number, nonbank lenders are able to offer several trucking company financing choices.
Through our 75+ lender marketplace, our Business Finance Advisors match you with the best options your business qualifies for. Not only does this save you the time of filling out multiple applications, but it also makes choosing the most competitive option much easier and more straightforward.
7 Best Types of Loans for Trucking Business Financing
Equipment financing covers the cost of any type of equipment you purchase for your business, including vehicles, electronics, and new technologies. Because the funding is secured by the equipment, this loan type poses less of a risk to lenders and may be easier to qualify for. Purchasing equipment this way spreads payments out over time to preserve more of your cash flow for other business uses.
Short-term business loans are a typical choice for companies in need of quick cash to serve as working capital. Depending on the lender, you can get access to your funds in a few hours or a couple of days. Use of the loan typically isn’t restricted to any one type of expense, so short-term financing can be a good choice to get you through a slow season or help your business recover from an emergency. Since shorter terms can equate to higher overall loan costs, be sure to get clear information on the payback terms and rates.
Invoice factoring covers the often-stressful period between issuing invoices and getting paid. Waiting a month or more for your money isn’t practical when you have expenses to cover right away, and putting off your own payments can drive down an already low credit score. With invoice factoring, you get a big chunk of what you’re owed up front by selling outstanding invoices to a lender. The remainder comes your way, minus fees, after customers pay. Some lenders offer a version of this loan type called freight factoring, which is specifically designed for trucking businesses.
A business line of credit is another useful form of funding for covering gaps or handling expenses when business is slow. Choosing this financing option means you always have a ready source of working capital and aren’t stuck dealing with years of loan payments. Look for a revolving credit line that replenishes every time you pay off what you’ve drawn.
Revenue-based financing is a special type of financing with flexible terms based on your trucking company’s sales. Revenue-based financing requires no minimum FICO score and no personal guarantee. It’s a short term solution, with repayment periods extending up to 18 months in most cases.
eQuickment Loans are also unique to National and are designed to secure equipment funding fast for businesses with FICO scores of 600 or more. With one-hour approval and funding available in less than 48 hours, eQuickment loans allow you to purchase equipment from your choice of vendor as soon as you need it. So, if critical vehicles break down or completely bite the dust, you can replace them right away and get your fleet back to full operating capacity.
SBA Loans are paid off on longer terms but are a great choice if your trucking company is looking to make a major purchase or investment. If you’re purchasing new trucks or kick-starting business in a new area, then an SBA loan may be the way to go. A Hybridge® SBA Loan from National can help you get bridge funding right away and an SBA loan down the line.
How to Qualify for Trucking Business Loans With Bad Credit
Here’s how any business owner can qualify for trucking business loans with bad credit.
Time in Business – Startups and newer businesses are statistically more likely to fail than a more established company. Lenders impose time in business requirements to mitigate the risk of a bad investment. As you gain more experience in your industry, you’ll likely receive better terms from lenders.
Monthly/Annual Revenue – Your business’ profitability often matters more than its credit score. If you have a low credit score, you can potentially get around credit requirements by displaying you generate enough revenue to cover the cost of your financing and then some. This reassures lenders that you’ll repay the borrowed amount within the time frame, which can help you reach an approval.
Collateral – Offering an asset as collateral gives lenders an extra layer of security if you default on your financing. It essentially transfers a percentage of the risk from the lender to the borrower, as the lender is able to recoup some of the default by collecting the borrower’s collateral. If you have a lower FICO score, it might be worthwhile to consider offering collateral.
If you’re having trouble reaching an approval with a bad credit score, consider taking time to proactively strengthen your credit. You can accomplish this by making timely payments, reducing account balances, and avoiding new credit accounts until you’ve secured your financing. Taking this step isn’t possible for those who need fast funding, but it’s a step that offers benefits well beyond trucking business loans.
Trucking Business Loans: How You Can Apply With Bad Credit
To get a trucking business loan, you’ll need to take the following steps:
Assess the Financial State of Your Business – First, you should evaluate your business from a macro and micro perspective. You’ll need to review your cash flow, determine how much debt you can safely take on, and identify any potential challenges that may occur during your repayment. This way, you’ll have a solid understanding of your business entering the application process, which will help you as you search for the best offer.
Research Lenders and Their Qualifications – Next, you’ll research the lenders you can apply with. For borrowers with poor credit, take careful note of each lender’s qualifications, including credit score, time in business, and annual revenue requirements. You should keep track of which lenders might be a good fit as you go through the process, so you can go back and apply with them later on
Fill Out Applications – Once you have a list of at least 5 lenders to apply with, you’ll start to fill out their respective applications and wait for decisions. Ensure you’re filling out each application accurately, as any mistakes can return a denied application and force you to start the process again.
Review Your Offers – If you applied with non-bank lenders, you’ll receive decisions on your applications relatively quickly. As they come in, you’ll carefully review the offered terms and determine whether they’re a good fit for your growth plan. Remember that there’s always room for negotiation on your contracts, so you may be able to improve your terms by speaking with the lender in question.
Select the Best One – Finally, you’ll choose the best offer you’ve received and, if it works for your bottom line, sign the agreement with the lender. Your funds should be distributed promptly, and you can start investing them into your business immediately after.
Applying for trucking business loans is a time-consuming process that many entrepreneurs can’t work into their schedule. Not only does it prolong growth for businesses, but it also creates a situation where a business owner will lock in the first offer they receive because they simply don’t have time to continue the process. At National, we’ve developed a way around this.
Instead of applying with lenders individually, you apply with us once and receive multiple offers through our 75+ lender marketplace. Our Business Finance Advisors match you with the best offers you qualify for, then help you select the best offer with ROI guidance and strategies to maximize each borrowed dollar.
Why Choose National Business Capital?
Regardless of your credit score, you have plenty of options to finance your trucking company. National Business Capital provides a range of small business loans to enable you to purchase equipment, cover expenses, or pursue growth.
Equipment financing is available with no minimum FICO requirement if you’ve been in business for at least six months and bring in $120,000 or more in annual sales. You can qualify for up to $5 million and have access to the funding in two to five days. At the end of the term, the equipment is yours. Depending on what type of equipment you purchase, you could also qualify for a Section 179 tax deduction!
Our Business Finance Advisors will educate you on this deduction and any others available to you. Along with this, they can help you get the most from your trucking business loan through ROI guidance and strategies to get the most out of your financing.
Let National point you toward the right loan type and structure to support your trucking business on the road to success. Apply now to get started!
