Benefits of Equipment Financing for a Trucking Business
How do you choose the right equipment financing for your trucking business?
It is always important to ensure that you weigh all options before you start the loan application process. Although most trucking business owners opt for term loans, ensure that you explore other credit facilities available.
While reviewing various financial options, you should find out how long the application process takes – particularly if you need a loan urgently. Although there are lenders who can approve loans within 24 hours, some banks can take several weeks, if not months before they revert back to applicants.
The other thing you should look out while reviewing a business loan option is the prerequisites for the loan application. Most lenders will require time to review your documents such as bank statements and credit scores.
They will then use this information to determine the terms of the loan as well as the interest rate to apply.
How does an equipment business loan operate?
Once you have made a decision to purchase your equipment through a loan, the next thing is to decide which lender to work with. As mentioned earlier, most lenders will take some time to review your credit score and financial statements.
This will help them to come up with an appropriate interest rate as well as terms and conditions for your loan.
Considering the fact that the equipment is your collateral, chances are that the interest rate for your loan will be lower compared to if it were a traditional bank loan.
This is because in case you are unable to repay the loan, the lender has a right to repossess the equipment and sell it to recover the unpaid balance.
How does one qualify for an equipment loan?
There are several things that lenders look at before they can consider your business loan application. However, each lender has its own criteria for qualifying applicants.
One of the things they will look at is your credit score. Some lenders might choose to look at both your business credit history and the company’s bank statements. The higher your credit score, the higher chances you have to get the loan approved.
Besides that, some lenders will also ask you to make a down payment of between 5 to 25% of the total amount. This will depend on your other qualifications.
Lenders might also want to know how long you have been in business before making that decision.
What are the benefits of equipment financing?
One of the reasons people take business loans is to expand their operations. According to recent research conducted by the American Transport Research Institute, trucking companies that have larger fleets earn more returns on their investment.
In case you currently have fewer trucks or equipment, it means you will have turn down a lot of jobs because of a lack of capacity. Taking a business loan to buy more trucks or equipment will increase your capacity to handle more work – hence generating more revenue.
Improve on technology
Technology is advancing every day and there’s a need to constantly update your equipment as well as trucks. Considering the fact that updating into new technology is expansive, the best alternative is to apply for a business loan.
Save on inventory
In most cases, purchasing equipment or items in large quantities can help save money. Instead of buying things on a per-unit basis, you can combine and purchase them all at once.
Before you decide on the equipment loan, it is important to know exactly what you need to add. This is to avoid taking too much or too little. If possible talk to a professional to determine the exact cost of the equipment you want to purchase.
This is another benefit of a business loan for a trucking business. It is a fact that trucking businesses are always expanding. However, you might not know exactly what time you will need to increase your capacity.
Improving the logistics of your company is something that cannot be avoided. This is because of the expansive nature of the trucking business. A trucking business loan will come in handy – especially if you want to upgrade and improve on your operations.
It is always good to be prepared to increase the operations of your company.
In general, a trucking business loan can help grow your business. If you are in the trucking business, you definitely understand how things can get tough – especially if you don’t have enough money to purchase inventory or purchase equipment.
The good thing is that there are several lenders who specialize in providing loans for people in the trucking business. All you need is to research a lender who offers reasonable interest rates and favorable terms.