Trucking and transportation companies are the backbone of the U.S. economy. Yet, with so many expenses to manage, it’s difficult for these businesses to get off the ground and remain profitable, especially with the fluctuating costs of fuel and materials. It’s an uphill battle, but there’s one key resource that entrepreneurs in this industry have available to help them stay ahead of their cash flow: short-term loans.
But what are the benefits of short-term loans for trucking businesses?
If you’re a trucking company looking to take a leap ahead of its competition, here’s everything you need to know about short-term loans and, more importantly, how to leverage your financing to support your growth.
What Are Short-Term Loans?
Short-term loans are exactly what you’d expect: A financing solution that’s designed to be repaid over a short period of time. Entrepreneurs typically leverage these types of loans to get through a specific challenge or to take advantage of an opportunity, whereas longer-term loans are more suited for expenditures that will take more than one year to complete. Each of these repayment schedules are advantageous for specific circumstances and industries, but for trucking companies, the benefits of short-term financing are seemingly endless.
You can use the funds from a short-term loan for almost any business purpose, including operational expenses, team expansions, special projects, temporary cash flow gaps, necessary equipment, taxes, or even renovating your property. For trucking companies, they can help you manage fuel costs, repair expenses, equipment purchases, and more.
Short-term loans typically do not require collateral and have flexible repayment periods, allowing borrowers to repay them on a schedule that works for them. They generally offer competitive interest rates and can be obtained quickly compared to other loan options.
How Do Short Term Loans Work?
Short-term loans work similarly to other types of financing, just on a shorter schedule. Once you identify a need for capital, you apply with multiple lenders, compare their terms, and select the offer that best fits your business.
The shortened term speeds up your repayment schedule, meaning you should expect daily or weekly payments instead of monthly. While this allows you to escape debt faster, the expedited repayment can overwhelm your business if you’re not careful.
They’re best for short-term revenue-driving opportunities, like capitalizing on a supplier’s discount or adding a new truck to your fleet, but can also be used to prepare for an upcoming busy season.
Eligibility Requirements of Short-Term Loans for Trucking Companies
Each lender has different qualifications. Banks and credit unions often want to see high credit scores, lengthy times in business, and substantial annual revenue to approve your business for financing. Even then, you’ll have to wait 60 to 90 days to receive your funds.
Here’s what to expect when working with a bank or credit union.
- 2+ Years in Business
- $250,000 in Annual Revenue
- 700+ Credit Score
Non-bank lenders, on the other hand, are essentially the opposite. They have less restrictive eligibility requirements, faster funding times, and – as a trade-off – higher interest rates. Some may see the higher cost of capital as something to avoid, but remember that revenue-driving opportunities can offset the higher price of your financing.
Here are National Business Capital’s qualifications for short-term loans.
- 1+ Years in Business
- $120k in Annual Revenue
- 580+ Credit Score
How Can a Trucking Company Use a Short-Term Loan?
The fluctuating cost of fuel, materials, and vehicle parts has created a difficult situation for entrepreneurs looking to stay competitive. Your supplier could offer a certain price one week, then that price is double the amount in the next week, forcing you to stay vigilant on a consistent basis to ensure you aren’t spending more than you have to. It’s something that the entire industry is dealing with as a whole, but it becomes much more challenging if you experience cash flow constraints that limit your ability to purchase the fuel, materials, and equipment you need to operate your business.
An inflated expense can limit your ability to operate at your highest capacity. But, with a business loan, you can secure an influx of cash to help you solve challenges or afford an opportunity for growth, even while your cash flow is locked up.
Wondering how you can use trucking loan funds? Here are a few ways that trucking companies can leverage short-term loans to support them as they grow:
- Cover fuel costs when prices rise
- Purchase trucks and other equipment
- Take advantage of bulk supplier discounts
- Hire additional team members
- Bridge gaps between customer payments
- Expand your physical location
- Launch a website
- Start a new marketing campaign
Keep in mind that short-term loans come with expedited repayment schedules. While this does help save money on interest, it can overwhelm your organization if mismanaged. There are significant consequences associated with late payments or a total default, so you should carefully evaluate your finances to ensure you’re able to repay the borrowed funds by the deadline.
What Are the Benefits of a Short Term Loan for Trucking Companies?
A short-term loan can provide the necessary funds for trucking companies to invest in repairs or upgrades without having to wait for the money to come from their regular income sources. In other words, they provide fast access to cash that can be used for a variety of purposes, including paying for fuel, insurance, repairs, maintenance, or other unforeseen expenses.
This type of financing reduces stress for both business owners and their drivers because it provides a quick solution that helps keep trucks running and customers satisfied. Short-term loans can also be used as bridge funding when purchasing new equipment or vehicles, helping small trucking companies access extra cash flow and increase their operations at a faster rate. This can lead to improved profits in the long run, which is beneficial for any company.
However, remember that the benefits of short-term loans for trucking companies depend on the lender you’re dealing with and the terms you’ve agreed to. Just because you were approved for a loan doesn’t mean that the offered terms fit your goals or the needs of your business; It just means that you met the qualifications and can move forward if you’d like. There are thousands of nightmares where entrepreneurs have locked themselves into contracts that do more harm than good, so make sure to carefully review your approvals with your business’s best interest in mind.
What Types of Short-Term Loans Are Available to Trucking Companies?
Short-term loans come in many different formats, with some being more flexible than their counterparts. Here are a few of the most common short-term loans leveraged by entrepreneurs in the trucking industry:
A term loan provides funds in a one-time lump sum payment that you manage over time. You’ll repay the borrowed amount within the terms outlined by your lender, alongside interest payments that are factored into your total repayment. Term loans are best for situations where you know the exact cost of a project or expense.
Business Line of Credit
A business line of credit is one of the most flexible short-term financing options available to those in the trucking industry. Unlike a term loan, where funds are provided in a lump sum, you’re able to draw capital from your line of credit on an as-needed basis. Once you repay the borrowed amount, you can take the same funds again, which allows you to have funds on hand for any challenge or opportunity that comes your way. A line of credit is best for projects where you don’t know the final cost and for any entrepreneur that wants to have an emergency fund on hand.
Equipment financing allows you to break down a sizeable asset purchase into a more manageable schedule. If you need to add a new truck to your balance sheet, repair a damaged vehicle, or strengthen your organization with a new CRM, equipment financing can help you reach your goals.
Late payments or slow-paying customers can seriously affect your cash flow. With revenue-based financing, you can leverage your future payments for cash in the short term, allowing you to continue operating at full capacity. This type of financing is beneficial for almost any opportunity or challenge, but make sure that the terms you agree to fit your business and goals before signing on the dotted line.
Tips for Applying for a Short Term Loan
Knowing how to get a loan for trucking businesses can put you one step ahead of your competitors. Continue reading for some insider tips for accessing capital as swiftly and efficiently as possible.
Much like other forms of financing, it’s important to prepare before starting the application process. First, you should gather your business documents, including:
- Business bank statements (going back at least one year)
- Business plan
- Business credit report
- Personal and business tax returns
- Relevant licenses and registrations
- Articles of incorporation
- Balance sheet
- Income statements
- Cash flow statements
Having these documents readily available makes it easier to apply with multiple lenders, which is recommended to ensure you can find the best deal.
Some financing solutions have credit score requirements that limit the number of entrepreneurs that can take advantage of them. If you’re pursuing a loan with a credit score requirement and your FICO doesn’t fit the mold, consider proactively strengthening your credit before applying to yield better rates and terms.
This option will only work for businesses that don’t require fast funding. If your opportunity or challenge can wait until you’ve built up your credit score, then it’s something to explore before sending out applications.
Find a lender you can grow with. It’s more important than ever in today’s economy to grow with a capital source behind you, and it’s even more essential for trucking companies navigating the fluctuating costs of fuel and supplies.
Growth isn’t a straight line; You’ll have many opportunities and challenges that arise throughout your journey. Working with a lender that you can grow with makes accessing capital in the future much more straightforward. Each time you secure financing, you build credibility with the lender, too, which will help you secure better rates and terms moving forward.
What Are the Interest Rates on Short-Term Loans?
Lenders determine interest rates based on the type of financing you’re seeking, the amount you want to borrow, the repayment schedule you’ve requested, and the financial information of your business, amongst other things. All of these factors combine to form your interest rate.
Let’s break down the factors that influence your interest rate.
Type of Financing
The type of loan you’re seeking to borrow will influence the interest rate you pay. For example, equipment financing agreements generally have higher interest rates than term loans, with SBA loans having some of the lowest interest rates on the market.
Amount to Borrow
Your interest rate will vary depending on the amount you’re seeking to borrow. Lower amounts will generally have lower interest rates because the lender is taking on less of a risk by financing your business.
Longer repayment periods will carry higher interest rates because of the risk imposed on the lender. Even if your interest rate is higher for a short-term loan, you pay less interest because of the abridged schedule, compared to longer-term financing.
Your revenue, credit score, and time in business all come into play when determining your interest rate. If you can display a high credit score, substantial annual revenue, and a lengthy time in business, your interest rate will be lower than a business without these qualifications.
Any lender offering to finance a business is taking on a risk of default, regardless of the profitability and financial security of the said business. Anything can happen during the repayment that causes the recipient to default on the payments, so lenders impose interest rates as a way of protecting themselves against a sudden default or loss of funds. If you’re having trouble securing an interest rate that fits your business, consider speaking with the expert Business Finance Advisors at National.
Why Choose National Business Capital for Short Term Loans?
Searching for the right lender isn’t something most entrepreneurs have time for. You’re busy running your business, so how can you take yourself away and put effort into your research? At National, we understand this very well, so we’ve created a time-saving machine for entrepreneurs that can move you from application to funding as fast as possible.
Our expert Business Finance Advisors leverage a 75+ lender marketplace to connect our clients with the right lender for their specific needs. You receive multiple competitive offers with one application, which eliminates the time you’d have to spend completing each lender’s application and waiting for decisions.
Our team works with you every step of the way, and if you aren’t happy with the offers we’ve received, we can go back to the drawing board until you’ve received an offer that fits your business, not just your budget.
We’ve secured more than $2 billion through 27,000+ transactions, with 2,200+ 5-star reviews on Trustpilot to back up our claims. No one can match National’s speed, simplicity, and professionalism—you can count on it.
Now that you know how to get a loan for trucking businesses, complete our digital application to get started.
Why Would a Business Use a Short-Term Loan?
Businesses leverage short-term loans for short-term challenges and opportunities. The abridged repayment schedule is best fit for businesses that are capable of repaying the borrowed amount within a year or less of the start date, where the funds come from either regular profit sources or from the source of their opportunity. For example, a business that can secure a supplier discount by purchasing inventory in bulk might benefit from a short-term loan, but only if the discount will yield revenue that outweighs the cost of borrowing or they have enough income to cover the cost of their financing.
Can You Use an SBA Loan to Buy a Semi-Truck?
SBA 7(a) loans are best fit for adding sem-trucks to your fleet. This type of financing features low-interest rates and favorable repayment terms, with shorter repayment offered based on your specific needs. The SBA underwriting process is notoriously long, but if you need fast funding, you can streamline your search with National Business Capital.
Is It Hard to Get a Short Term Loan for Trucking Companies?
Honest answer? It depends on your business, the type of financing you’re seeking, and the lender you’re working with.
It’s harder to reach an approval with a bank or credit union than with a non-bank lender because of the strict eligibility requirements associated with these “traditional” lenders. Non-bank lenders finance a wider range of businesses, but their loose eligibility criteria translate to higher interest rates.
So, is it hard to get a short-term loan for trucking companies? It’s not difficult as long as you’re working with the right lender, and you can find that lender easily by working with National Business Capital’s 75+ lender marketplace.
How Do I Apply for a Short-Term Loan?
Applying for a short-term loan is as simple as finding a lender offering this type of financing, but securing terms that fit your needs is a bit more difficult. First, you’ll research lenders and find a few that offer what you’re looking for, taking careful note of the eligibility requirements of each option. Then, you’ll need to gather your business financial information and start applying through each lender. You’ll have to wait for decisions for each application, but if you’re looking to shorten the process considerably, you should team up with National and our 75+ lender marketplace.