How to Get a Loan for Your Taxi Business—Even as a Solo Operator

Running a taxi business can be rewarding and profitable. But there are challenges. With increased competition from ride-hailing services like Uber and Lyft, it’s essential to adapt your strategies to remain competitive, especially if you’re a solo operator.

Digital solutions such as online bookings and digital payments can help you grow your business. However, a major hurdle for taxi drivers is securing enough capital. Whether you’re a solo driver or manage a fleet, you’ll need funds for your taxi cabs, insurance, permits, marketing, fuel, and daily operations.

This is where taxi loans become essential. With the right financing, you can keep your business running smoothly and grow. This guide will walk you through the best options for getting taxi loans to support your business needs.

Understanding Your Taxi Loan Options

Three primary types of lenders provide taxi loans: traditional lenders, the SBA, and alternative lenders.

• Traditional Business Loans: Small business owners traditionally sought loans from traditional lenders, i.e., banks and credit unions. While this may have met the needs of entrepreneurs for many years, that isn’t always the case today. To get approved for taxi loans, banks and credit unions require stronger credit and more time in business. The loan application process is also comprehensive and lengthy, and business needs today must be met more quickly.
• Small Business Administration (SBA) Loans: SBA loans are underwritten by SBA-approved lenders. They’re a great option for small business owners looking for the excellent terms. As with traditional loans, SBA loans typically require at least two to three years in business. But lenders may be slightly more flexible with credit requirements and may approve applicants with credit scores as low as 650.
• Alternative (Online) Lending Platforms: Alternative lenders may have a more simplified loan process and more flexible funding options than traditional lenders, meaning if your credit isn’t perfect, there’s a good chance you can still receive financing. What’s more, online loan platforms process taxi loans much faster.

Types of Financing for Your Taxi Business

Lenders offer a variety of financing options and taxi loans tailored to various business needs. Here are a few.

Business Credit Cards

A business credit card can be a great short-term solution for handling smaller business expenses, including repairs to your taxi vehicle, marketing costs, and fuel. The advantage of a business credit card is that it provides an avenue to build your business credit. This can help you get more small business loans down the road.

Business Line of Credit

A business line of credit gives you access to funds as needed. It works similar to a business credit card and offers you a maximum credit limit to draw from. You only pay interest on the amount you draw, making it more flexible than a fixed loan.

Equipment Loans

A taxi cab purchase qualifies as equipment for your business. An equipment loan can be your best option in this case, as the loan is secured by the vehicle, so you likely won’t need additional collateral. Lenders view equipment financing as lower risk, so it’s often easier to get approval. Even if you’re seeking funding for a fleet of new vehicles.

Term Loans

A term loan is one of the most common types of finance for taxi loans. It offers lump-sum funding upfront with a fixed repayment schedule. This makes it easier to budget to pay back the loan. Both traditional and alternative lenders offer term loans. But some online lenders may cater to taxi business owners with a shorter business history, making it easier to qualify for the loan.

Revenue-Based Financing

Revenue-based financing is an alternative for borrowers with less-than-stellar credit seeking funding for a taxi business. The majority of revenue-based financing comes from online lenders. This funding option allows you to borrow from your taxi business’s future earnings and repay the loan as a percentage of future receivables.

Positioning Your Loan Application For Success

Applying for taxi loans is a pivotal step in your business journey. It’s essential to convey to lenders that you’re serious about your venture and that you’re financially stable. Here are some steps you can take to convey your readiness to take on a loan.

Begin by Improving Your Credit Score

If you already have a good credit score, then you can move on to the next section. But if your score doesn’t quite meet the lender’s specifications, take the steps needed to improve it, wherever possible.

Even if you can get approved for taxi loans with your current score, a higher score means better loan terms and lower interest rates.

Depending on the type of financing, an alternative lender usually will prefer a credit score in the 620 to 650 range. The SBA and traditional lenders look for credit scores in at least the 650 to 680 range.

You can improve your score by doing the following:

• Paying down existing debt
• Avoid applying for other loans before a business loan application
• Consolidating debt to refinance for a lower monthly payment
• Disputing inaccuracies on your credit report

Have a Solid Business Plan

Whether you’re a solo operator with a simple business model or a full-fledged taxi company with a fleet of vehicles, a business plan shows lenders you’ve done your homework. While many online templates claim what a business plan should look like, there are a few essentials.

Your business plan should include:

• Your goals and strategies on how you plan to achieve those goals
• Services you offer
• Pricing and marketing strategies
• Research about your target market
• Financial projections
• The loan amount you’re asking for and how you plan to use the loan funds

Prepare the Financial Documentation

Most lenders will want to review any relevant financial statements before issuing taxi loans. This provides proof of financial stability and improves the chance of receiving a loan approval. Depending on the lender, the list of financial documents required might include:

• Tax returns
• Bank statements
• Profit and loss statements
• Cash flow statements
• Balance sheet
• Meter records
• Required legal documentation, such as business licenses, permits, insurance, taxi medallion, etc.

Downpayment and Collateral

Depending on the type of taxi loan and the lender, you may need to provide a downpayment and/or collateral to secure the loan. Both minimize the risks for lenders and are more likely to weigh in favor of an approval when included in the loan.

Some lenders have minimal downpayment and collateral requirements for taxi loans. Before applying with a lender, learn more about what they expect. But outside of those conditions, the more you can put into the loan, the better the loan terms will likely be.

Navigating the Taxi Loan Application Process

Now that you’re more familiar with the types of taxi loans and how to increase your odds of getting approved. Many taxi operators have perfect credit and seemingly do everything right. However, some applicants receive a rejection letter for their taxi loan or end up with loan terms they’re not happy with.

This can happen for any number of reasons. By following the next few steps, you can end up with the results you want the first time.

1. Organize Your Documentation

It’s not enough to just have your documentation. You want it ready to go. Think of it this way. If a lender asks for a list of documentation for your taxi loan and you don’t deliver it right away, they might not think your need is urgent.

Whether it’s ID, proof of income through bank statements or fare logs, financial documentation, tax returns, business licenses, vehicle registration, or insurance details, having these ready before you apply can speed up the process and show you’re serious.

2. Watch Out For Mistakes When Applying for Taxi Loans

A misstep during the loan application process can delay approval or cause a rejection altogether. It’s essential to take the time when applying and enter accurate information. Avoid submitting an incomplete application and over or underestimating income.

It’s also important to use the same name across all applications when applying for taxi loans. Some business owners inadvertently enter their legal name on one document and the business name or nickname on another, which can cause delays.

3. Shop Around for Lenders

It’s smart to compare each taxi loan’s advantages, interest rates, repayment terms, and funding timelines. Feel free to check with a few lenders before settling on the one that best suites your needs.

For example, a bank might take weeks to process your loan, while an alternative lender can have funds in your bank account in days.

4. Respond to Follow-Ups

Lenders sometimes request additional documentation or have questions about your application. It’s prudent to provide a timely response to move your application forward.

Conclusion

Getting taxi loans, even as a solo operator, is easier when you’re well-prepared and have the right business strategies. By understanding your financing options, strengthening your credit and documentation, and navigating the application process carefully, you can position yourself for success.

FAQs About Taxi Loans

Can I get taxi loans if I’m a solo operator with no employees?

You can receive financing if you meet the lender’s underwriting criteria and show your ability to repay the loan. You can also use your taxi loan as a stepping stone toward other business loans as you grow your business.

Can I get a taxi loan with bad credit?

While you’re not likely to get a commercial taxi loan with a bank if you have bad credit, it’s possible to get financed with an alternative lender. Some alternative lending platforms have flexible funding for borrowers with lower credit scores. The caveat is that it will likely come with a higher interest rate and shorter repayment term. But if you repay the loan on time, it can help you strengthen your credit profile.

What is the best type of loan to purchase a taxi vehicle?

One option to consider when purchasing a taxi for your business is an equipment loan. These loans are often easier to qualify for since the vehicle itself typically serves as collateral. However, depending on your financial situation and business goals, other types of financing might also be worth exploring.

Is there an SBA loan available for taxi drivers?

The SBA has several types of loans that are useful for taxi drivers and serve different business needs. For example, a 7(a) loan can be used for working capital, purchasing taxi vehicles, or even purchasing an existing taxi business. For smaller needs up to $50,000, the SBA has a microloan program that is perfect for solo taxi operators.

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