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SBA Commercial Vehicle Loans: The Essential Guide

vehicle, sba commercial vehicle loans

Many small businesses need to purchase a commercial vehicle or fleet of vehicles. You might need commercial vehicles as part of your primary business function, such as a semi-truck for trucking companies. Or you might need vehicles to support operations, such as delivery trucks for a wholesaler.

Regardless of the business purpose, one thing all commercial vehicles have in common is a high price tag. Those costs increase even more for specialty vehicles like a food truck or heavy equipment used in construction.

Most businesses lack the liquidity to purchase or repair expensive vehicles. Fortunately, you can potentially use SBA loans for commercial vehicle purchases.

However, these loans are difficult to qualify for and take a long time to fund. We can help you determine if an SBA commercial vehicle loan is right for your business by covering how they work, the qualifications, and the pros and cons.

Specifically, we’ll answer these questions and more:

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    What are SBA Commercial Vehicle Loans?

    The SBA does not have a dedicated commercial vehicle loan, but you can use SBA loans to purchase or repair commercial vehicles. You can also use the loans for working capital to support a trucking or transportation company.

    Commercial vehicle loans fall under the umbrella of equipment financing. The most commonly used SBA loan for equipment financing is the SBA 7(a) loan. You can purchase heavy machinery and other fixed-asset equipment with an SBA 504 loan.

    Small Business Administration (SBA) Loans


    The US Small Business Administration is a federal government agency that provides various services for the nation’s small business community. One of its primary tasks is administering the SBA loan program.

    Small business owners cannot apply directly to the SBA for a loan. Instead, the SBA maintains a network of lenders it qualifies to offer the loans. You must apply to an SBA-approved lender.

    The SBA sets rules for lenders to follow, caps the interest rates and fees lenders can charge, and partially guarantees SBA loans up to 85%. With backing from the federal government, lenders can offer higher borrowing amounts at low interest rates and extended repayment terms. Many consider SBA loans the “gold standard” of small business financing.

    How do SBA Commercial Vehicle Loans work?

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    As stated, the primary SBA loan to purchase commercial vehicles is the 7(a) loan. However, some businesses can use a 504 loan for certain heavy equipment vehicles, such as construction vehicles and semi-trucks.

    Let’s look at how each loan works.

    Standard 7(a) Loan

    • Maximum Loan Amount: $5 million.
    • SBA Guarantee: Up to 85%.
    • Terms: Up to 25 years for real estate; 10 years for other purposes.

    Small businesses can use the 7(a) loan for various business purposes, including purchasing equipment, funding working capital, purchasing commercial real estate, and business expansion. The SBA guarantees 85% for loans up to $150,000 and 75% for loans over $150,000. Loan funds can’t pay for personal expenses.

    When you use this loan for equipment financing, including commercial vehicles, the equipment is the collateral. This is known as a self-collateralized loan, which is similar to a consumer car loan.

    The lender holds a lien on the vehicle title until the loan is paid off. You’ll have fixed monthly payments, including the principal, interest, and fees.

    The vehicle you’re purchasing must have a genuine business purpose and be used by the business at least 51% of the time. Examples of vehicles you can buy include:

    • Cars for business purposes.
    • Delivery trucks.
    • Construction vehicles (bulldozers, backhoes, cement mixers, etc.)
    • Semi-trucks.
    • Vocational vehicles (dump trucks, tow trucks, etc.)
    • Transportation vehicles (vans, buses, etc.)

    Most lenders require a down payment between 10%-20%. In addition, the SBA also requires the lender to put up capital in the loan. In this way, all three parties – the borrower, the SBA, and the lender – share some risk with the loan.

    This completes the three components of the loan as defined by the SBA:

    • The Equity Injection: What the SBA calls the down payment.
    • The SBA-Guaranteed Loan Portion: Anywhere from 50%-90% of the loan.
    • The Bank Loan: The loan portion that SBA doesn’t guarantee.

    Variable Interest Rates

    For loans with a maturity under 7 years:

    • $0-$25,000: Prime rate + 4.25%
    • $25,001-$50,000: Prime rate + 3.25%
    • $50,001 or above: Prime rate + 2.25%

    For loans with a maturity over 7 years:

    • $0-$25,000: Prime rate + 4.75%.
    • $25,0001-$50,000: Prime rate + 3.75%.
    • $50,0001 or above: Prime rate + 2.75%.

    Fixed Interest Rates

    • $0-$25,000: Prime rate + 8%.
    • $25,001-$50,000: Prime rate + 7%.
    • $50,001-$250,000: Prime rate + 6%.
    • Over $250,000: Prime rate + 5%.

    SBA 504 Loans – Heavy Equipment Only

    • Maximum Loan Amount: $5 million or $5.5 million for special projects.
    • SBA Guarantee: Up to 85%.
    • Terms: Up to 25 years for real estate; 10 years for other purposes.

    For the most part, businesses cannot use SBA 504 loans to purchase commercial vehicles, even if they’re purchasing a fleet. The only exceptions are vehicles that qualify as heavy equipment.

    Examples of heavy equipment vehicles include:

    • Cement trucks.
    • Dump trucks.
    • Custom-built heavy trucks.
    • Semis and tanker trailer trucks for the trucking industry.

    SBA 504 loans – or CDC/504 loans – are a specialized subset of the SBA loan program that provides long-term financing to purchase commercial real estate and other major fixed assets that promote business growth. 504 loans also require working with Certified Development Companies (CDCs) and a third-party lender (TPL) to process the application and receive funding.

    CDCs are the SBA’s community-based partners who regulate nonprofits and promote economic development within the community. Small businesses partner with CDCs to obtain funding for long-term major fixed assets that promote job creation and business growth.

    Loan amounts range from $125,000 to $5 million. Loans can go up to $5.5 million for special energy products but cannot exceed $16.5 million for three such projects.

    Repayment terms run between 10 and 25 years. In standard 504 loans, the funding breakdown goes as follows:

    • 40% of loan funds come from the CDC.
    • 50% of loan funds come from the private lender.
    • 10% down payment from the borrower.

    Examples of how borrowers can use the funds include the purchase or construction of:

    • New facilities.
    • Equipment and machinery with long-term use.
    • An existing building, land, or other fixed assets.

    What are the advantages of SBA Commercial Vehicle Loans?

    SBA financing options can provide up to $5 million to purchase a commercial vehicle or fleet of vehicles. Borrowers get low interest rates and extended repayment terms.

    SBA lenders report on-time loan payments to the major business credit bureaus: Experian, Equifax, and Dun & Bradstreet. Successfully paying your loan will help build your business credit, making it easier to secure financing in the future.

    The low interest rate and long repayment terms mean your monthly payments are lower than most loan structures. This helps ensure you maintain strong cash flow during the life of the loan.

    Many SBA loans require collateral. The SBA requires lenders to collateralize loans over $350k to the “maximum extent possible.” Some businesses might struggle to provide collateral for working capital loans, but with equipment financing, the asset serves as collateral.

    What are the disadvantages of SBA Commercial Vehicle Loans?

    The most significant disadvantage is the difficulty in getting approved. While you might assume that partially guaranteed loans are easier to qualify for, and it’s a logical assumption, the truth is often the opposite.

    Since the SBA doesn’t provide concrete qualifications, lenders can set their own standards, and some are more stringent than others. For example, commercial banks and credit unions are more biased toward established companies.

    The loan application process also requires a lot of patience and having enough runway to wait for approval. Aspiring applicants might wait weeks to get a determination if the SBA will guarantee the loan.

    It’s common to meet with several lenders and submit multiple applications. Some lenders will tell applicants to try again in a year when finances have improved.

    Another disadvantage is the down payment. Borrowers must provide 10%-20% of the vehicle or fleet cost upfront.

    Pros & Cons

    pros, and, cons


    • Small businesses can get up to $5 million for commercial vehicle or fleet purchases.
    • Low interest rates with long repayment terms.
    • The vehicle or equipment you’re financing is the collateral for the loan.
    • Low monthly payments in most cases.


    • Lengthy application and approval process.
    • Large amounts of paperwork.
    • Almost always requires a personal guarantee & down payment.
    • Requires good-excellent credit.

    How do I qualify for an SBA Commercial Vehicle Loan?

    The SBA sets specific requirements for borrowers, and each lender might include additional requirements. In general, businesses need good to excellent credit, healthy cash flow, two years in business, and substantial annual revenue.

    Approved businesses that UCS works with usually meet these minimum requirements:

    • Credit score of 650+ (some lenders say 680+).
    • $360k in annual revenue.
    • Two+ years in business.

    In addition, the SBA requires applicant businesses to:

    • Be a for-profit business.
    • Do business and be physically located in the US or its territories.
    • Have invested personal time and money in the business.
    • Exhaust all other financing options (SBA loans are “last resort financing.”)

    How do I apply for an SBA Commercial Vehicle Loan?

    United Capital Source can help you apply to an SBA lender following these steps.

    Step 1: Ensure You Qualify

    You’ll need a credit score between 650-700 and a healthy, consistent cash flow. You’ll need a detailed plan of how the equipment purchase will help you invest in and grow the business.

    Step 2: Gather Your Documents

    Be prepared to provide:

    • The invoice for the commercial vehicle or fleet of vehicles.
    • Driver’s License.
    • Business license or certificate.
    • Voided Business Check (for business bank account information).
    • Bank Statements.
    • Credit Report/Statement of Personal Credit History.
    • Business Tax Returns.
    • Credit Card Processing Statements.
    • Personal Tax Returns – 3 Years.
    • Business Tax Returns – 3 Years.
    • Business Plan (Not in all cases).
    • Personal Financial Statement.
    • List of Real Estate Owned or Business leases if applicable.
    • Business Debt Schedule/Loan/Rent/Lease Documentation
    • Deeds/Title/Ownership documentation for any collateral/Security
    • Current Profit & Loss Statements and Balance Sheet Year-to-Date
    • A/R and A/P Reports
    • United Capital Source 1 Page Application

    Step 3: Fill Out the Application

    You can begin the application process by calling us or filling out our one-page online application. Either way, you’ll be asked to enter the information from the previous section along with your desired funding amount.

    Step 4: Speak to a Representative

    Once you apply, a representative will contact you to explain the repayment structure, rates, and terms of your available options. This way, you won’t have to worry about surprises or hidden fees during repayment.

    Step 5: Receive Approval

    SBA Loans through our network generally take 3-5 weeks to process. Once approved and your file is closed, the lender will send the funds to the equipment vendor to purchase the commercial vehicle(s).

    Frequently Asked Questions

    faq, ask, often

    Here are the most common questions about SBA commercial vehicle loans.

    Can trucking and transport companies use SBA loans?

    Yes, SBA loans are an excellent way for companies in the trucking and transport industry to acquire vehicles, equipment, and working capital to support and grow operations. However, your trucking company must meet the SBA’s size standards to qualify as a small business. Fortunately, the SBA provides a convenient Standards Tool to help you determine if you’re eligible.

    Can I purchase a Commercial Vehicle with an SBA 504 loan?

    Most small businesses cannot purchase commercial vehicles with an SBA 504 loan. The only exceptions are if the vehicle qualifies as heavy equipment. For example, a trucking business might be able to use a 504 loan to purchase a tractor-trailer.

    What are my alternatives to SBA Commercial Vehicle Loans?

    While SBA loans are arguably the most advantageous small business loans on the market, many options exist outside the program. Many traditional and online lenders provide equipment financing, which you can use to purchase vehicles.

    Equipment financing through UCS’s network of lenders offers the following features:

    • Funding amounts: Up to $5 million per piece of equipment.
    • Factor rates: Starting at 3.5%.
    • Terms: 1-10 years.
    • Speed: 3 -10 business days.

    Getting approved for a non-SBA equipment loan for a commercial vehicle purchase is also potentially more accessible. Approved businesses we work with typically meet the following minimums:

    • Credit score: 600+.
    • Time in business: 1 year+.
    • Annual revenue: $250k+.

    There are also a variety of other small business loans you could potentially use for commercial equipment or other business purposes. You might be interested in one of the following small business loans for trucking or other businesses:

    SBA Commercial Vehicle Loan – Final Thoughts

    truck, semi-trailer, usa

    SBA loans provide some of the lowest-cost financing available for small businesses. You can use SBA 7(a) loan funds for most business purposes, including equipment financing and commercial vehicle purchases. Most lenders also let you purchase used vehicles if they’re in good working condition.

    The drawback to the loan program is that it can be challenging to qualify. While SBA loan qualifications are often not as strict as bank or credit union qualifications, they’re much more difficult to qualify for than alternative business loans.

    Even so, it would be worth applying if you think you might qualify. If not, there are alternative equipment loans available to purchase commercial vehicles.

    Contact us if you have more questions on SBA commercial vehicle loans or want to apply for a small business loan. Our loan executives can help you find the best funding options for your commercial vehicle needs.

    We will help you grow your small business.

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