Semi Truck Financing Companies for New and Established Trucking Businesses

Key Takeaways:     

• Semi-truck financing companies review various risk factors like credit history, time in business, revenue, down payment, and more.
• Whether a borrower is a new trucking business or an established business can impact the risk assessment, eligibility, and options.

• Equipment loans, term loans, and SBA loans may be options for semi truck financing.

Trucking companies may all do similar jobs. But whether you’re a new trucking business or an established company can affect your financing options if you need capital for a semi-truck. In this guide, we cover factors that semi-truck financing companies consider and how they differ between new and established businesses. We also break down how to evaluate the best truck financing companies to find the right fit for your business needs.

What Factors Do Semi Truck Financing Companies Consider?

Semi-truck financing companies evaluate both a borrower’s ability to repay the loan as well as the truck that’s being financed. Requirements vary by lender, but here are common factors that they review whether you have a new or established trucking business.

1. Credit History

Lenders review your credit history as part of your semi-truck loan application. In some cases, lenders may check both your personal and business credit scores.

Newer trucking companies may not have an established business credit profile yet, so lenders rely more on the owner’s personal credit history, and it can carry more weight. Established carriers may have robust personal and business credit histories to draw from.

In general, a higher credit score may improve your eligibility and help you qualify for competitive rates. However, it’s important to note that there isn’t a single minimum score for all semi-truck financing companies.

Lenders may pay close attention to your outstanding credit, payment history, and negative marks like bankruptcy.

2. Time in Business

Trucking companies employ drivers with special skills honed over years of experience. Ensuring the job gets done and everyone stays safe is an important part of the occupation. That’s why time in business, or how long your company has been operating, is another key factor that semi-truck financing companies consider as part of your application.

New trucking businesses may have very little operating history for lenders to evaluate, which can be considered a risk. Established businesses have a track record to show, alongside revenue and debt repayment.

Time in business requirements vary widely based on the lender. Some alternative lenders may focus on financing startups, whereas traditional banks and credit unions may prefer businesses with a longer operating history.

3. Down Payment

For commercial truck loans, lenders may require a down payment. A down payment is a percentage of the truck’s purchase price that the borrower provides upfront. It gives the lender some upfront capital, which both reduces the lender’s risk and the amount that you need for semi-truck financing.

Down payments can often range from 10% up to 30%. However, down payment requirements can change based on your financial profile and the lender. New businesses with limited operating history, experience, and credit may see higher down payment requirements.

Established trucking businesses may qualify for different down payment amounts depending on their creditworthiness, operating history, and financial strength. Aside from your business, the actual truck’s purchase price and value can impact the down payment amount.

4. Industry Experience

In the trucking business, having a commercial driver’s license (CDL) is typically necessary for semi-trucks. Obtaining the appropriate license is just one part of it, though. Industry experience matters a lot, as well.

While it’s not everything and doesn’t guarantee approval, it can help semi-truck financing companies assess your proficiency with commercial driving and trucking. Lenders assess risk, and in trucking, experience is one factor.

For new owner-operators, lenders may put more emphasis on your actual driving experience. Established trucking businesses have a proven track record and lenders may focus more on the financials, as well as the owner’s expertise and experience. Requirements can depend on the lender.

5. Current Debt

If you need to purchase a new semi-truck, you likely need capital to make it happen. Borrowing with semi-truck financing companies can be a smart move. But it’s important to be aware that these lenders also review your current debt obligations to determine whether you have the capacity to manage an additional monthly payment.

Having a large amount of debt relative to your revenue and cash flow can be a warning sign for lenders and may make approval more challenging.

New trucking businesses may not have that much business debt. But other personal factors can still impact underwriting. Established businesses may have more debt obligations, but also more historical cash flow and revenue records.

6. Revenue and Cash Flow

Semi-truck financing companies want evidence that you can afford your payments and have a buffer. Aside from reviewing your current debt load, lenders also evaluate your annual revenue and cash flow.

Established trucking companies may have an easier time in this area, as they have hard data to show. Whether that’s recent bank statements, tax returns, or other financial statements, they typically have several years or more of data to show lenders that they can handle the payments.

New businesses, on the other hand, may have insufficient data and have a harder time qualifying with traditional banks. Some alternative and online lenders may focus more on cash flow projections and current contracts.

7. The Truck Itself

It’s not just the borrower that lenders look at when applying for commercial vehicle financing. The truck itself also must meet your lender’s specific equipment requirements.

Semi-truck financing companies may look at various factors, including:

• Condition of the truck
• Age of the truck
• Mileage
• New vs. used semi-truck
• Purchase price
• Estimated value
• Type of truck
• Buying from a dealer vs. private seller

Lenders may have specific eligibility requirements for the types of trucks they will finance, including set limits on mileage and a truck’s age. So, even if you qualify as a borrower, if the truck doesn’t meet the lender’s requirements, you might not be eligible for financing with that particular lender.

Many of these equipment requirements apply to new and established trucking businesses. But operating history and borrower profile can impact risk assessment. For example, a new company buying an older truck with a lot of mileage on it may face challenges getting financing because of the lack of operating history and lower resale value.

How Financing Requirements Differ for New vs. Established Trucking Companies

While semi-truck financing companies may consider many of the same factors for new and established trucking companies, there are some important differences.

1. Different Underwriting Guidelines

One of the primary differences between financing a new versus established trucking company is the underwriting criteria.

New businesses have very little business history, so semi-truck financing companies may put more emphasis on the owner’s personal credit, cash flow projections, and industry experience. Having a solid business plan in place, current contracts, and revenue projections can be helpful.

For established trucking companies, lenders look at historical business data and performance. This can include cash flow, payment history, revenue, and existing debt.

2. Focus on Personal and Business Credit

Semi-truck financing companies don’t evaluate all borrowers the same way. Lenders often look at an owner-operator’s personal credit history for newer businesses that may not have a business credit profile yet.

Depending on the lender and type of financing, both business and personal credit history may be considered for more established companies.

Credit score requirements depend highly on the lender and how much weight it carries can depend on your other risk factors. Stronger personal and business credit profiles may help with better loan terms and interest rates.

3. Revenue Expectations

Revenue can vary significantly whether you’re an owner-operator or fleet owner, or whether you’re a new or established trucking company. Lenders may have different revenue expectations for newer businesses that typically lack years of data. Instead, they may consider the owner’s finances, future work contracts, and current revenue and cash flow projections.

Since established trucking companies have profit and loss statements, bank statements, and tax returns, it’s easier for lenders to verify current financial data as part of their risk assessment.

4. Varying Down Payment Amounts

Down payment requirements depend on the lender and borrower profile. For new businesses, lenders may require a larger down payment to counteract the higher levels of risk. But semi-truck financing companies all set their own underwriting criteria.

Established trucking companies, depending on their financial picture and credit profile, may qualify for a smaller down payment. However, that’s not guaranteed. The type of truck, its value, and the loan amount can also impact the size of the down payment.

Documents for Semi Truck Financing

If you’re applying for semi-truck financing, you’ll need to provide lenders with supporting documentation. These documents may vary, but many lenders ask for the same documents.

For both new and established businesses, lenders may require the following documents:

• Commercial driver’s license (CDL)
• Government-issued I.D.
• Employer Identification Number (EIN)
• Business formation documents
• Proof of business ownership
• Business bank statements
• Detailed truck information, including mileage, make, model, purchase price, and year

New trucking companies may need to provide:

• Personal bank statements
• Personal tax returns
• Business plan
• Financial projections
• Existing contracts
• Proof of trucking experience

Established trucking companies may need to provide:

• Business bank statements
• Business tax returns
• Profit and loss statements
• Cash flow statements
• Existing debt information

Final Thoughts

If you’re researching semi-truck financing companies, check out multiple different options. Consider banks, credit unions, and online lenders, and compare equipment loans, term loans, and SBA loans.

Each lender and loan type will have different requirements, advantages, and drawbacks. Whether you’re a new trucking company or an established company, you have various choices available, so you can apply for financing that aligns with your needs.