What is Semi Truck Financing?
Semi-truck financing is a broad term that encompasses various methods for acquiring a commercial freight truck on credit. Most big rig financing agreements are loans, leases, or lease-to-own contracts.
Owner-operators and small business freight companies have numerous options for securing a loan for a semi-truck. Commercial banks, trucking finance companies, and alternative financing facilitators all offer semi-truck financing products. Financing enables businesses to retain cash for unforeseen expenses or capitalize on growth opportunities.
How does Semi Truck Financing work?
There are several financing strategies available to acquire a semi-truck. Most truck options use an APR (Annual Percentage Rate).
Equipment Loans
Equipment financing is a type of small business loan used to acquire a wide range of business equipment, including semi-trucks and other commercial vehicles. With an equipment finance strategy, the truck acts as collateral. If you default on the loan, the lender repossesses the truck.
Using the truck as collateral lowers the risk for the lender. Reducing the risk means you can usually borrow a higher amount with longer terms and reasonable interest rates. Most trucking business owners use an equipment loan because they typically offer the most advantages.
Since the collateral is built into the loan, you usually won’t have to add any additional collateral or business assets. Some semi-truck loans will require a down payment, while others won’t. The equipment loan will cover 100% of the fair market value in many cases, but it depends on the lender, your financial strength, and the total amount you’re borrowing.
Here are some key facts to know about using this loan type for your commercial truck financing:
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Up to $5 million per piece of equipment.
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Loan terms are between 1 and 6 years.
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Interest rates start at 3.5%
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Funded in 3-10 business days.
Commercial Truck Financing Companies
These lenders offer semi-truck financing options for the trucking industry. They primarily deal with commercial vehicle and commercial fleet financing programs. Small business owners should be aware that they typically require a down payment.
Like traditional banks, the approval qualifications are high, and funding times can run longer. You’ll typically need good credit, no tax liens, and high annual revenue to qualify. Direct commercial truck loan companies include CAG Truck Capital, Commercial Fleet Financing, and Truck Lenders USA.
Commercial Banks
Some traditional banks, like Wells Fargo, PNC, and Bank of America, offer commercial truck financing. Like any lender, there are advantages and disadvantages to consider. A down payment of 10% to 30% is generally expected, based on the credit profile and business equity, when applying for a loan.
The advantage of working with a traditional bank is that it typically offers the best rates. Some people also enjoy the experience of meeting with their local banker to review the loan. The disadvantage of these lenders is that approval qualifications are often very high, and it takes longer to fund your loan. They usually require a down payment as well.
What are the Best Semi Truck Financing Companies?
Several financial institutions offer financing for commercial trucks. Choosing the best option for your needs depends on multiple factors. For example, you might need a payment plan, service line, or other factors that could influence your decision.
Here is our list of the best commercial trucking companies.
Wells Fargo Commercial Truck Financing
Wells Fargo offers several financing options for tractor-trailers. You can apply for a term loan, an equipment line of credit, or commercial truck leasing. The bank’s lease program includes both standard leases and lease-to-own options.
Wells Fargo is a good option for larger purchases, as commercial truck financing starts at $100,000. Terms are available from 12 to 84 months.
U.S. Bank Truck Loan
U.S. Bank makes truck loans available through its equipment financing program. The bank offers a quick application process for loans up to $150,000. You can also prequalify for loans up to $500,000.
U.S. Bank’s equipment financing for semi-trucks caps out at $1 million. Loan terms range from 32 to 60 months, and interest rates are not disclosed.
Bank of America
Bank of America offers business equipment financing for semi-trucks ranging from $25,000 to $750,000. APRs for the bank’s equipment financing rates start at 5.5%, and terms range from 12 to 60 months. To qualify, business owners and owner-operators need at least two years in business and $250,000 in annual revenue.
CAG Truck Capital
CAG stands out from other commercial truck lenders because it offers specific engine overhaul financing in addition to truck financing. So, CAG Truck Capital is an excellent choice if you want to repair your current big rig without replacing it entirely.
The commercial truck lender is also a viable option for borrowers with bad credit. Interest rates start at 10%. CAG has provided truck financing for over 40 years.
Commercial Fleet Financing (CFF)
CFF offers semi-truck financing with a quick turnaround time for approval and funding. The lender states it can approve applications in as little as two hours and provide funding within 24 hours. CFF is an excellent option when you need to purchase multiple trucks.
If you have a sufficient business history, you may not need to sign a personal guarantee with CFF. Many truckers prefer this option as it doesn’t put their personal assets at risk. CFF offers loan terms ranging from three to nine years.
Truck Lenders USA
Truck Lenders USA offers financing ranging from $15,000 to $250,000 for most truck loans and up to $1 million for their jumbo leases. They’ve been in business since 1977.
The lender has some strict qualification requirements. You must have a minimum credit score of 675, and the truck you’re financing cannot be older than 7 years. Repayment terms range from 24 to 60 months.
Balboa Capital
Balboa Capital is an alternative lender offering a wide range of business financing options, including commercial truck loans. To qualify, you’ll need a minimum of one year in business, a FICO score of 620, and at least $100,000 in annual revenue.
The highly rated online lender offers an easy application process with credit approvals within one hour during working hours. If approved, it’s possible to get same-day financing. Loan amounts for commercial trucks go up to $500,000.
First Capital Business Finance
First Capital offers various business finance packages and is a suitable commercial truck financing option for startups and borrowers with bad credit. The company accepts credit scores as low as 540, but the lower your credit score, the higher the down payment requirement.
You could get semi-truck financing with no down payment if you have excellent credit. The lender’s main drawback is the low maximum financing amount of $100,000.
TLG Financial
TLG Financial has access to more than 40 trusted financial sources and provides various financing options for purchasers of commercial trucks. Their offerings include loans, TRAC and FMV leases, and sale-leasebacks, with flexible terms like low down payments and seasonal plans. TLG supports buyers with all credit profiles, including those with first-time purchasing experience. As the financing arm of The Larson Group, they help owner-operators and fleets secure reliable funding solutions tailored to their needs.
How do you qualify for Commercial Truck Financing?
Different lenders will have varying qualification requirements for credit approval. In general, most commercial truck lenders require a good credit score, no tax liens, and cash flow that shows your business can afford the monthly payment for the loan.
Many lenders provide financing options for borrowers who demonstrate consistent monthly revenue or sales. Documentation required for semi-truck financing includes business tax returns, profit and loss statements, and bank statements.
With an Equipment loan, the commercial truck is the collateral, typically lowering the requirements for approval. Here are the qualifications you need to meet for an equipment loan through United Capital Source:
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Minimum credit score: 600.
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Time in business: at least 1 year.
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Minimum annual revenue: $250,000.
Industry-Specific Requirements:
Semi-truck financing companies also require you to follow specific laws related to owning and using a commercial truck. All borrowers are required to have a CDL (Commercial Driver’s License) to qualify, as it’s necessary to use the truck for business purposes.
Proof of insurance covering property damage and liability is necessary for securing semi-truck financing. You must register your business officially to qualify for semi-truck financing.
How to apply for a Semi Truck Equipment Loan:
The application process is relatively fast, and you can apply directly through our one-page application in minutes. Or reach out to one of our loan experts to guide you through the process.
Step 1: Make sure the commercial truck is the right purchase for your business.
This step has two goals: making sure the truck is right for you and suitable for the lender. Can the truck handle the usage necessary for your business? Does the truck hold enough value for the lender to justify using it as collateral?
Lender-friendly trucks are typically purchased from a reputable dealer, are less than 10 years old, and have fewer than 600,000 miles. The newer and lower the mileage, the better, as the lifetime value of the commercial truck directly impacts the loan.
Step 2: Gather your documentation.
When applying for a semi-truck equipment loan, you need to provide the following:
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Driver’s license.
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The invoice for the truck or fleet.
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Voided check.
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Bank statements from the past three months.
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VIN for the commercial truck(s).
Step 3: Complete the application.
Go to our application page or give us a call for more information.
Step 4: Speak to a representative.
After we receive your application, a senior account executive will reach out to you. The account executive will discuss your business needs and focus on your commercial truck equipment financing options and fixed-term business loan offers. We offer complete transparency, with no hidden fees or surprises.
You’ll get a complete breakdown of loan amounts, terms, interest rates, and fees. Once you have all the information, you can make an informed decision about your commercial truck loan.
Step 5: Get approved.
Your equipment loan is approved when your application meets underwriting requirements and receives credit approval. Next, the money is paid to the seller to settle the invoice.
The lender is on the title with you until you pay off the loan. We can help you set up automatic payments, or you can arrange to pay by check or electronic payment.
What are the advantages of an Equipment Loan for Semi Truck Financing?
Equipment loans are one of the most common forms of semi-truck financing. There are several advantages of using an equipment loan to acquire a commercial truck. Commercial truck financing provides flexible payment terms, enabling businesses to choose repayment plans that align with their revenue streams. Financing allows businesses to own the truck, building equity over time.
18-wheelers are expensive. New trucks range from $80,000 to $200,000, while used trucks start at $20,000. That means you need a large loan with long repayment terms. Most long-term loans for high borrowing amounts require considerable collateral – some lenders require collateral of equal or greater value than the borrowing amount.
With an equipment loan, the semi-truck you’re financing is the collateral. In most cases, you won’t have to pledge additional collateral since the truck is equal to the value of the loan. This is known as a “self-collateralized” loan. You may be familiar with other self-collateralized loans, such as a mortgage.
Since the collateral is built into the loan, lenders can offer higher borrowing amounts at more favorable rates and terms. The application process is typically quick and easy, especially when working with an online lending marketplace like United Capital Source. Online lenders and lending marketplaces also provide fast funding for commercial equipment truck loans.
Financing provides access to newer commercial trucks equipped with the latest technology and safety features. Fixed interest rates in financing agreements enable businesses to predict their monthly payments more accurately. Depending on the financing structure, businesses may be eligible for tax benefits, including deductions for interest and depreciation.
When you use an equipment loan, you might be able to deduct the truck’s total cost with the Section 179 deduction. Consult your accountant or tax professional to see if your business and semi-truck loan qualify for the deduction.
What are the disadvantages of an Equipment Loan for Semi Truck Financing?
All financing comes with an inherent risk for both the lender and the borrower. You will need to pay interest and fees for the loan, and your interest rate is likely higher the lower your credit score.
Depending on the loan structure and lender, you may be responsible for making repairs out of pocket. Some lenders do include repair warranties, though.
One of the most significant drawbacks to equipment loans, in general, is that the asset may depreciate or become obsolete before the loan is repaid. This is less of a concern for semi-trucks, as most are built to last a long time and log hundreds of thousands of miles. If purchasing a used truck, ensure it passes a full mechanical inspection.
While some equipment loans finance 100% of the market value, others will require a down payment. You’ll likely need a down payment if you have a low credit score or other financial issues.
Most equipment loans charge an APR, so in theory, paying off the loan early would result in saving interest. However, most lenders include a prepayment penalty for equipment loans.
Pros & Cons of Using an Equipment Loan for Semi Truck Financing
Pros:
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Large borrowing amounts and extended repayment terms.
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Competitive interest rates.
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The tractor-trailer is the collateral for the loan.
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Quick and easy application with a fast turnaround on funding.
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Potential to finance 100% of the truck’s market value.
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Possible tax savings with a Section 179 deduction.
Cons:
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Might be responsible for repairs, depending on the lender.
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The truck could break down or become obsolete before the end of the loan term.
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A down payment may be required, depending on your credit and the cost.
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Possible prepayment penalty.
Frequently Asked Questions
Here are the most common questions about financing an 18-wheeler.
Is it better to finance or lease a Semi Truck?
The answer to this question depends on your unique needs and what your credit can afford. Truck leases are typically easier to obtain and have lower monthly payments, thereby easing the financial strain of financing. On the other hand, you don’t own the truck and might have to follow strict usage rules, such as mileage restrictions.
In most cases, purchasing a semi-truck with a loan is the better financial option since the trucks are built to last. However, a lease makes more sense if you’re still repairing your credit or know you want to upgrade in a few years.
How do I select the right Commercial Truck Lender?
Selecting the right lender largely depends on your available credit, how much you need to borrow, and your business objectives. It’s usually good to apply to multiple lenders to find the best deal for your commercial truck needs.
All lenders look at your credit score to assess the likelihood of default on a loan. Interest rates vary significantly based on credit history, experience, and specific details about the truck purchase.
Let’s compare the benefits and drawbacks of the different types of lenders available.
Commercial Banks
Banks typically offer the lowest interest rates and the most favorable terms. However, traditional banks usually have the longest approval process. They normally involve a substantial amount of paperwork, and securing funding can take weeks.
Additionally, commercial banks tend to require good to excellent credit. Credit scores of 670 and above are considered good. Borrowers with good credit scores typically need to provide a 10% to 15% down payment for semi-truck financing. A larger down payment can reduce the loan amount, leading to lower monthly payments.
Commercial Truck Lenders
Direct truck lenders often have the most industry experience and can offer unique perks. Some of them are excellent for startups and new owner-operators. Many truck dealerships provide on-site financial services.
The drawback is that they don’t always offer the highest borrowing amounts, and some impose usage restrictions. Several commercial truck loans are only available for existing business owners.
Alternative Lenders & Lending Marketplaces
Online lenders and alternative business lending facilitators offer the greatest flexibility for semi-truck equipment loans. Most offer easy online applications that can be completed in 10 minutes or less. Some offer same-day business financing with few exceeding 10 days to fund a loan.
Are there Financing options for First-Time Buyers?
There may be financing options available for first-time buyers, but they can be more challenging to access. Lenders typically prefer to work with existing transportation companies.
First-time buyers should consider the total cost of ownership, including maintenance and insurance, when financing a semi-truck. Purchasing a semi-truck is a significant investment. Providing a substantial down payment can help offset some of the lender’s risk when working with first-time buyers.
Financing options for first-time buyers can vary widely and may require different documentation. Pre-approval can help streamline the financing process and clarify budget limits for first-time buyers.
New trucks may have lower operating costs due to decreased maintenance needs compared to used trucks. Reading the fine print of financing agreements is crucial to avoid hidden fees and unfavorable terms.
Can I get Tractor Trailer Financing with bad credit?
Yes, it is possible to obtain a semi-truck loan with a bad credit score. Some lenders specialize in bad credit business loans for commercial trucks. Keep in mind that a lower credit score typically means higher interest rates and fees. Demonstrating consistent monthly revenue and sustained sales can improve your chances of securing financing, particularly if you have a poor credit history.
If you’re having trouble finding a lender that accepts your credit score or you want to get a lower-cost loan, there are several actions you can take to improve your loan application. You could try the following:
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Get a co-signer.
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Offer a larger down payment.
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Pledge additional collateral.
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Demonstrate high revenue & cash flow to support repayment.
Semi Truck Equipment Loan – Final Thoughts
There are numerous options available for financing a commercial truck. Choosing the right lender and loan type largely depends on your credit score, business history, and the speed at which you require the funds.
Commercial banks typically offer the lowest-cost financing; however, bank loans are often the most difficult to qualify for. Direct lenders offer the best industry experience but tend to provide less flexibility. Equipment loans through alternative lending options typically offer the greatest flexibility and quickest funding times, but the cost may be slightly higher than that of a traditional loan.
Contact us if you’re ready to apply for an equipment loan to finance your next semi-truck purchase. Our loan executives can help guide you through the process and find the right financing package for your business needs.
