If you have recently become an owner-operator and want to secure your own semi truck, then you will very likely need truck financing. While this is something not all owner-operators may need, it is surely something that a lot of businesses must secure. Financing can be difficult to secure, and many auto financing companies will not offer loans for commercial vehicles. If you want a used freightliner, then you will need to work with a commercial financing company. There are several things you should do to make sure that you are accepted for the loan.
Go For A Newer Truck
While a used semi can obviously save you a great deal of money, you may not be able to find an underwriting company who will offer you financing if the truck is too old. Older trucks are a risk because they are more likely to break down. Breakdowns are serious when it comes to commercial vehicles because a repair issue means that you are not working or making money to pay for your loan. Financing companies know that and will sometimes only offer loans for trucks that are moderately new. This may mean that a 10-year-old truck may be financed, while a 20-year-old one may not.
The mileage may be an issue when it comes to financing as well. Many trucks can drive well with over 1,000,000 miles on the engine. However, an overhaul will likely be needed around the 750,000 or 800,000 mile mark. If the engine has not yet been rebuilt and the mileage is over 750,000, then this may be an issue when it comes to financing.
Another issue with an older truck is the fact that one that is 15 or 20 years old may not be able to be resold by the financing company. Specifically, the truck is the collateral used to secure the loan. If the collateral is not worth a lot in terms of resale, then the loan is a risky one. You can help to increase the odds of getting the loan by securing another type of collateral and also securing a fairly hefty down payment. You may need a down payment that is around 50% of the purchase price of the truck.
Wait A Year
There are several different factors that can make your loan seem risky. These include a low credit score, the age of the business, your cash reserves as a business, and the number of trucks that you own. If this is your first semi, then the finance company may be concerned about your inability to function as a business when a breakdown occurs. Some financing companies specifically state that they may not work with a business that does not have two or more trucks already. This may place you in a difficult position if you cannot get a truck in the first place with the assistance of a financing company.
If you do not already have a truck, then try to work on some of the other factors that may affect your ability to get a loan. Work for or with another trucking company for a year or more to increase your experience and to also build your cash reserves. Also, make sure to pay your bills on time. Something as seemingly unrelated as not paying your mandated child support can have a severely negative effect on whether or not you can acquire the right truck financing, so make sure that these payments as well as alimony or other court ordered payment plans are followed.
Also, if you have not set up your business as a legal entity yet, then you may want to think of creating a partnership or corporation instead of a sole-proprietor business. While you may have to share the profits of your trucking company with another individual, you will also be less of a risk in the eyes of a financing company.