Simplifying Semi Truck Financing
The decision to purchase a truck or trailer is a big one, and financing one can feel even bigger. But if you’ve never made a commercial purchase of that size, it can be pretty overwhelming. Finding the right equipment can seem like a breeze once you dig into obtaining financing and get flooded with banking terms. At TEC we want to be your best business partner, and that means giving you the information you need to make the right call, on a truck, trailer, financing and so much more. In addition to sales, parts and service, we also have an in-house financing team with decades of experience, so you can trust that we know what we’re talking about. We’re here to provide everything you need to find the financing that works for you so you’re prepared when you decide to buy.
And when you’re ready to start looking for a truck, take a look at our Used Truck Buying Guide for tips and tricks on where to look and what to ask.
The absolute first step to obtaining financing for commercial equipment is to be bankable. What does that mean, though? For the vast majority of lenders, that means having a good credit score and existing commercial credit.
What is commercial credit?
Commercial credit is generally any loan used for business purposes. But, where you get your loan will impact rates as well as where that credit line is reported. Commercial lenders typically report to Paynet instead of the Big 3 standard credit bureaus (Experian, TransUnion and Equifax). This is important as your personal debt-to-income ratio will not be impacted like it would if you obtain financing from a bank who reports to the Big 3.
If you need commercial credit to get commercial credit, how do you get some in the first place? For large purchase amounts, think new or like-new trucks, commercial credit is a must. But we know you have to start somewhere!
Commercial financing is also considered a high risk investment for most lenders, so the key to getting good terms is offsetting that risk. Factors that lower the risk include:
- Long history of reliable payments
- Larger down payment
- More time in the industry
- More experience as a business owner
Your Biggest Commercial Financing Questions, Answered!
Our financing team talks to lots of buyers every single day, and they hear a lot of the same questions. We asked our team for the answers to all those questions to help you on the way to purchasing a truck or trailer.
How much is the down payment?
The short answer is however much you’re willing and able to put down. Down payments go a long way towards lowering the risk to a lender. When you invest in your own business with a larger down payment, lenders feel better about investing too. So if you have anything iffy in your credit history, a larger down payment can help. For first time buyers, you’ll likely need a larger down payment, in the 10s of thousands, depending on the final price of the truck or trailer itself.
What is the interest rate?
Again, the short answer is it depends. Interest rates vary quite a bit depending on several factors, including:
- Price of the equipment
- Your credit history
- Your business’ history
- Your annual revenue
- Where and how you’ll use the equipment
- Length of the loan, and tons of other factors.
If you’re brand new to trucking, your rate will be higher. If you have a great cosigner, your rate could be lower. Interest rates for commercial truck or trailer purchases tend to range anywhere from single digits up into the 20s. But again, the rate you receive depends entirely on your individual situation.
How long is a semi truck loan?
As with interest rates, the length of the loan depends on your individual situation, the equipment you’re purchasing, and the bank or lender. Typically loans run from six to 72 months (that’s six years).
What paperwork do you need for a commercial loan?
When you work with TEC Finance, all we need is a commercial credit application and a purchase order to start shopping for loans. In some cases, that may be enough, but we’ll ask for the documentation we need to build you up as an attractive applicant to a lender. That other documentation might include:
- Tax returns
- Financial statements
- Bank statements
- Haul reference letters
- Debt schedule
- Accounts receivable schedule
Getting a Good Loan
So now that you understand more about what a commercial loan looks like and what you need to get one, how do you make sure you actually get a good deal? That’s where working with your dealer works in your favor. Our financing team is in the business of getting our customers into trucks and keeping them there. We’ve spent a lot of time vetting the 40+ lenders we work with to ensure they’re willing to negotiate and provide our customers good terms. And before a contract gets to you for a signature, we review it for overly-restrictive policies. We’ve had major banks rewrite financing contracts to remove wording that doesn’t serve your best interest. And because we’re on your side, we make sure you understand all the terms of a contract.
Sometimes there are non-favorable terms in a finance contract that you need to keep an eye out for. In financial contracts, the fine print can be tricky to understand, but when you work with the TEC Finance team, you can be sure we’re looking out for these non-favorable terms. These are things we keep an eye on when getting customers financing, but other lenders may not:
- Pre-payment penalties – Most contracts have a pre-payment penalty, but we review them to ensure they’re the industry standard or better.
- Non-cancelable – You are responsible for all the payments, including unearned interest should you decide to pay off the loan.
- UCC statements – These are legal notices stating a lender’s right to obtain personal property in case a borrower defaults on their loan. Some contracts allow lenders to tie other assets into the UCC statement.
No matter if you’re a first time semi truck buyer, or if this is your tenth truck, finding a lender that can get you attractive terms is just as important as finding a truck or trailer that can get the job done. Our finance teams are always willing to help you find the financing that works for your business, today and down the road.