Despite challenges such as high fuel and equipment prices, labor concerns, shipping rates, inflation and recession talk, trucking and transportation are set for a return to normality for the balance of 2023 according to industry experts. That is good news for owners of trucking and transportation companies, since trucking remains the most relied-upon freight transport mode in the U.S.
With the cost of used vehicles expected to moderate this year and diesel prices predicted to settle at about $4.30 per gallon by mid-year, this could be a good time to start a trucking and transportation company or expand an existing operation. But what if you don’t have cash on hand to get the equipment you need? No worries—you should consider trucking and transportation equipment financing. Here are answers to some commonly asked questions about it.
What is equipment financing? What types of equipment can you finance? Equipment financing is similar to getting a loan to buy a car—you choose what you want to buy and enter into an agreement to receive the funds to do it based on specific repayment terms. Trucking and transportation businesses can use equipment finance to obtain assets that include:
- Tractors and trailers
- Refrigerated vehicles
- Delivery trucks
- Semi-trucks
- Low- and flat-bed trailers
- Heavy equipment haulers
How does equipment financing work for trucking and transportation companies? What are the benefits? Equipment financing for trucking and transportation companies works in the same way it does for any other industry. It is a common financing solution for businesses that need new equipment but lack the financial capability to pay for it in cash. There are a number of benefits associated with equipment financing, including:
- Conserving capital for other business expenses rather than tying it up in fixed assets
- Lower upfront costs than what’s associated with a traditional bank loan
- Preserving existing credit lines for other purposes while gaining a new source of credit
- The ability to finance the cost of the equipment plus installation, maintenance, taxes, shipping charges and software
- Potential tax benefits, as it may be permissible to write off monthly payments as an operating expense or capitalize the outlay
What is the difference between trucking and transportation equipment financing and business loans? Perhaps the biggest difference is that the latter is going to be more difficult to secure, especially if you are just starting out or do not have a solid credit history. With equipment financing, the equipment serves as the collateral, while you may need a hefty down payment to be approved for a business loan from a bank.
What requirements do trucking and transportation companies need to meet to apply? Specific requirements will vary depending on the lender but it is typical to be required to have at least two years in business and a credit score of at least 620. That being said, alternative lenders are going to be more flexible than their bank counterparts and look at each situation on its own merits before making a financing decision.
What other funding options do trucking and transportation companies consider? If your company needs funding for something other than acquiring equipment, there are a few options available to secure the necessary financing, including:
- Small Business Administration (SBA) trucking loans
- Business lines of credit
- Short-term loans
- Invoice factoring
The key is to carefully research, consider, and compare options to determine the right type of trucking loan for your business. Regardless of which type of loan you choose, it’s important to ensure the funding offers returns that outweigh the cost of borrowing.
Contact Clear Skies Capital today at 800-230-9822 to see if your trucking and transportation company qualifies for equipment financing or discuss other funding options.