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SBA 7(a) Loans for Trucking and Transport Companies
SBA 7(a) loans can be an excellent way for trucking companies to source working capital, expand operations, or buy another business. Find out more.
- SBA 7(a) Loans for Trucking Firms: The Basics
- How You Can Grow Your Transportation or Trucking Business
- How SBA 7(a) Loans Can Help Trucking Firms
- Financing Trucks and Trailers
- How Long Can You Finance a Commercial Truck for?
- Working Capital
- Buying a Competitor
- Refinancing Business Debt
- Expanding Your Trucking Company
- Specific SBA 7(a) Details for Trucking Companies
- Is Collateral Required?
- Maximum Loan Amounts
- Credit Score Requirements
- Case Study: Expanding a Logistics Firm in Arizona
- Large Trucking Firms Can Also Benefit From SBA 504 Loans
- Other Financing Opportunities for Trucking Companies
- Get Your Best Loan
- Related Questions
- Get Financing
The trucking industry is huge. While there may not be many household names apart from UPS, FedEx, and the likes, the industry includes approximately 1.2 million unique companies.
A huge proportion of these companies need access to capital at some point, and SBA 7(a) loans are a great choice for a variety of reasons. SBA loans for the logistics industry average around $110,000, and they have many potential uses.
SBA 7(a) Loans for Trucking Firms: The Basics
How You Can Grow Your Transportation or Trucking Business
To grow your transportation business, it is crucial to secure the necessary working capital to capitalize on potential opportunities that may arise.
One way to achieve this is by partnering with organizations like Janover, which specializes in assisting small business owners in qualifying for funding. Engaging with our financial experts will provide you with detailed information on how to drive business growth and obtain the financing needed for expansion. You can get in touch with us by putting your details into the form below.
How SBA 7(a) Loans Can Help Trucking Firms
The trucking and transport industry can be tough for businesses who don’t have the funds they need. Fortunately, trucking entrepreneurs can use SBA 7(a) loans for purposes including:
Financing Trucks and Trailers
Equipment loans can play a crucial role in financing trucks and trailers for commercial trucking companies in several ways. Firstly, they provide the necessary cash flow for new businesses to seize opportunities or tackle unexpected emergencies. Instead of paying for trucks and trailers with a lump sum, equipment financing allows for low monthly payments, enabling companies to maintain healthy cash reserves in their industry. Furthermore, equipment financing offers the advantage of low interest rates, making it an affordable option for new businesses.
To elaborate on how equipment loans can assist with financing trucks and trailers, consider the following potential uses:
- Purchase new trucks: Equipment loans can be used to acquire brand new trucks for a commercial trucking fleet. This enables companies to expand their operations and ensure access to reliable and efficient vehicles.
- Refinancing truck loans: Commercial trucking companies may already have some trucks financed through previous loans. Equipment loans can be used to refinance these existing loans, potentially reducing interest rates or extending the loan terms to improve cash flow.
- Upgrading outdated equipment: As technology advances, it becomes necessary for commercial trucking companies to upgrade their equipment to stay competitive. Equipment loans provide the funds needed to replace outdated trucks and trailers with newer, more efficient models.
- Buy used equipment: Equipment loans can also be utilized to purchase used trucks and trailers. This option can be particularly attractive for new businesses looking to minimize upfront costs while still obtaining reliable equipment.
- Update equipment software: In addition to financing the physical vehicles, equipment loans can also cover the cost of upgrading software systems used in the trucks and trailers. This allows for improved efficiency, better communication, and enhanced tracking capabilities.
By utilizing equipment loans, commercial trucking companies have access to favorable interest rates, longer loan terms, and the necessary funds to acquire, upgrade, or replace trucks and trailers. This enables them to optimize their operations, remain competitive in the market, and maintain healthy cash reserves for other business needs.
How Long Can You Finance a Commercial Truck for?
With an SBA 7(a) loan, you can get long-term financing for buying a truck. For equipment like a truck or trailer, your loan term is permitted to be up to 25 years.
Working Capital
Running a trucking company can get expensive— and you might not always know when you’e about to get hit with a big charge. From truck repairs, to accidents, and driver overtime, an SBA 7(a) loan can provide the money your firm needs to move forward.
Buying a Competitor
The trucking business can be extremely competitive, and in some situations, it could be in your best interest to purchase the competition; acquiring their routes/clients, trucks, and some, if not all, of their drivers.
Refinancing Business Debt
If you want to refinance SBA-eligible business debt to reduce interest rates or free up cash flow, an SBA 7(a) loan can be an effective way to do so. However, the SBA stipulates the debt must currently be offered to the borrower on unreasonable terms, and needs to have been used for business purposes, not personal expenses.
Expanding Your Trucking Company
If you want to expand to new routes, hire new truckers, or purchase new trucks, an SBA 7(a) loan could be a great way to do it.
Specific SBA 7(a) Details for Trucking Companies
Is Collateral Required?
Collateral requirements for a transportation loan depend on the type of financing the business is securing. In the case of longer-term financing like an SBA loan or equipment financing, collateral is typically required. However, if the business is securing a line of credit or a bridge loan, collateral may not be necessary. Alternatively, factoring is a form of financing that utilizes a business's open accounts receivables as collateral for lending purposes.
Maximum Loan Amounts
Loan amounts typically begins at a minimum of $5,000 and can go up to as high as $5 million. In fact, if you require a larger loan,we collaborate with a number of lending institutions that can provide funds exceeding $5 million in certain situations.
Credit Score Requirements
Most SBA 7(a) lenders prefer borrowers to have at least a credit score of 640. And, of course, the higher your score, the more advantageous your financing terms are likely to be. If your credit score has recently fallen below the 640 mark, though, that may not be a deal breaker provided you can adequately explain any ongoing circumstances that caused the change.
Case Study: Expanding a Logistics Firm in Arizona
Bryan, a skilled logistics expert, founded Goodyear Haulers, a transport and trucking business in Goodyear, Arizona. Over the years, his business gained a reputation for its reliable and efficient services, catering to a diverse clientele that included manufacturers, retailers, and e-commerce companies.
As the demand for his company's services grew, Bryan realized that expanding his business was crucial to maintaining its competitive edge and meeting the increasing needs of his customers. He sought an SBA 7(a) loan to finance the expansion, which included purchasing new trucks, hiring additional drivers, and investing in a state-of-the-art logistics software system.
Bryan applied for an SBA 7(a) loan of $350,000, which he planned to use for his expansion plans. He prepared a thorough business plan, outlining his objectives, market research, and financial projections. This document played a crucial role in convincing lenders that Goodyear Haulers was a viable and profitable venture.
Bryan's impeccable credit history, coupled with his extensive experience in the transportation industry, made him an ideal candidate for an SBA 7(a) loan. Upon approval, Bryan was able to execute his expansion plans, taking Goodyear Haulers to new heights.
With the loan funds, Bryan purchased five new trucks, hired and trained six new drivers, and invested in cutting-edge logistics software to improve the efficiency of his operations. The expansion allowed Goodyear Haulers to extend its reach, serve a broader customer base, and further solidify its reputation as a trusted transport and trucking business in Arizona and beyond.
This is a fictional case study provided for illustrative purposes.
Large Trucking Firms Can Also Benefit From SBA 504 Loans
Most trucking companies will likely find that the SBA 7(a) loan is the best fit for their needs. However, for some of the largest “small” trucking businesses, especially those that want to purchase commercial real estate to build a new trucking hub, an SBA 504 loan could be the best choice. While SBA 504 loans can’t be used for working capital, they other benefits, such as lower interest rates, and a larger maximum loan amount.
Other Financing Opportunities for Trucking Companies
Trucking companies have several loan options available to them outside the realm of SBA loans to meet their financial needs. Let's explore two options: freight factoring and asset-based loans.
Freight factoring is a common form of financing in the transportation industry. Trucking businesses often face payment terms of 30 to 45 days from their clients, which can cause cash flow challenges. Freight factoring allows companies to receive immediate payment on their invoices, eliminating the wait time and ensuring consistent operating capital. This type of financing is particularly beneficial for covering weekly expenses such as fuel, payroll, and maintenance. Additionally, factoring companies may provide services like billing and collections, saving time and improving efficiency.
Another loan option for trucking companies is asset-based loans. The transportation industry heavily relies on assets such as accounts receivable and trucks. Asset-based loans allow businesses to secure a revolving line of credit using these assets as collateral. This type of loan combines the advantages of freight factoring and equipment loans, as it provides ongoing cash flow while also supporting new truck purchases. One of the key benefits of asset-based loans is that companies only need to have a single lending relationship, simplifying cash flow management and offering a direct point of contact.
Finally, for larger needs, you can pursue an SBA 7(a) and SBA 504 loan structure, where the SBA 504 loan is used for any real estate or heavy equipment while the 7(a) goes towards working capital, new trucks, inventory costs, expansion plans, and so on.
Get Your Best Loan
So: You know that your trucking company has several loan options available. Freight factoring provides immediate payment on invoices, addressing cash flow challenges. Asset-based loans combine the advantages of factoring and equipment loans, offering a revolving line of credit secured by accounts receivable and vehicles.
SBA loans, on the other hand, provide favorable terms and lower interest rates and are suitable for both smaller and larger funding needs. By considering these loan options, trucking companies can find the financing solution that best suits their specific requirements.
We’re here to help you get the commercial financing you need. Complete the quick form below to get a free quote and learn more about how SBA financing could transform your small business.
Related Questions
What are the eligibility requirements for SBA 7(a) loans for trucking and transport companies?
The eligibility requirements for SBA 7(a) loans for trucking and transport companies are outlined by the Small Business Administration (SBA). Generally, the business must be a for-profit, small business, and the loan must be used for business purposes. Additionally, the business must meet the SBA's size standards, be able to demonstrate the ability to repay the loan, and have a sound business purpose. For more information, please see the SBA's SOP 50 10 5 Subpart B 7(a) Loan Eligibility.
What are the advantages of SBA 7(a) loans for trucking and transport companies?
SBA 7(a) loans can provide trucking and transport companies with a variety of advantages, including:
- Working capital: An SBA 7(a) loan can provide the money your firm needs to cover unexpected expenses, such as truck repairs, accidents, and driver overtime.
- Buying a competitor: An SBA 7(a) loan can help you purchase the competition, acquiring their routes/clients, trucks, and some, if not all, of their drivers.
- Refinancing business debt: An SBA 7(a) loan can be used to refinance SBA-eligible business debt to reduce interest rates or free up cash flow.
- Expanding your trucking company: An SBA 7(a) loan can be used to expand to new routes, hire new truckers, or purchase new trucks.
For more information on SBA 7(a) loans, click here.
What are the maximum loan amounts for SBA 7(a) loans for trucking and transport companies?
The maximum loan amount for SBA 7(a) loans for trucking and transport companies is $5 million. For larger trucking businesses, an SBA 504 loan could be the best choice, with a maximum loan amount of $5.5 million.
What are the repayment terms for SBA 7(a) loans for trucking and transport companies?
SBA 7(a) loans for trucking and transport companies typically have repayment terms of up to 25 years. The exact repayment terms depend on the loan amount, the use of the loan proceeds, and the borrower's creditworthiness. Generally, the maximum repayment term for working capital loans is 7 years, while the maximum repayment term for equipment and real estate loans is 25 years.
For more information, please refer to the Standard Repayment Terms for SBA Loans page on the SBA website.
What documents are required to apply for SBA 7(a) loans for trucking and transport companies?
To apply for an SBA 7(a) loan for trucking and transport companies, you will need to provide the following documents:
- Business tax returns for the past three years
- Personal tax returns for the past three years
- Business financial statements
- Personal financial statements
- Business license
- Business lease
- Business plan
- Personal guaranty
- Collateral
For more information, please visit SBA 7(a) Loans for Trucking and Transport Companies.