Owning your dream of being your own boss by being an owner-operator of your own trucking business starts with a single step: owning your own truck. Thus comes your need for financing. Many drivers shy away from the idea of starting their own business because they don’t think they will get approved anyway. But getting a truck loan is not impossible as long as you’re well prepared for what’s coming.
Let’s walk you through these steps so you will be guided in your future truck financing endeavors.
Improve your credit situation
One of the most important things you need to do before you begin your financing acquisition process is to check whether your credit is healthy. A score of 700 up is a good indicator of a solid borrower. That is if you’ve not been in the business for a significant period of time or is just starting up. If you’ve been in the industry for a couple of years and has a credit score of at least 550, you have a good chance at getting that needed financing. Otherwise, you may have to do some convincing by putting down a big down payment of at least 10 to 30 percent of the loan amount.
Before you apply for financing, check your credit score online. If it is not substantial, take chances to improve your credit – pay off debts, settle liens, pay your taxes, etc.
Find a good truck you can lease
The amount of financing you will get is not only dependent on your credit score but also on the condition of the truck you will finance. If you don’t have enough cash to purchase a brand new semi-truck, you can opt to lease one, but it should be at least less than 10 years old, in good condition, and less than 700K in mileage.
It is hard to finance – as it is to insure – old trucks because they are prone to breakdowns and are therefore prone to risk. The details you must secure when finding the right truck to lease include: make and model, the serial number, the year and mileage, truck photos, the truck’s age, and a detailed report of its condition.
Keep your cash reserves healthy if you want security for your business. As an owner-operator of a semi-truck, cash is necessary to keep your business running. This is assuming you do not have an excellent credit, or enough down payment, or maybe you’re leasing a used truck. Having enough cash on hand helps you cover for complications that might result to business interruption. Insurance, personal expenses, your semi’s repairs are just some of the most important things that your cash can save when you most need it. It will also help assure the lender that you will not be too stressed with the loan and default in no time.
Get an insurance
A major aspect of the trucking business is a good insurance coverage and your lender knows this. However, your policy would determine the kind of business you are carrying: it can either be just the truck or inclusive of those of employees. Costs may vary depending on driver’s experience, the market price of the semi, and the estimated monthly mileage, among others. If you hire a carrier, they may cover some of the needed policies. Speak with them before you head out policy shopping.
Find a good lender
There are various lenders catering to commercial trucking. They are also as diverse as their requirements and qualifications. Take time to shop around and compare rights to see which one best suits your unique needs.