Most people are used to walking into a bank, showing tax returns, banks statements, and other financial documents to get a loan for a home or maybe even a car.  In commercial financing, time is money.  Gathering and underwriting tax returns takes times and the buying emotion can turn cold while bankers wait for people to gather financial statements.  This is why most commercial equipment lenders like to finance individual pieces of equipment on an "application only" basis.  It's what vendors want. It's quicker and people maintain their interest longer.  Using an application only to make a credit decision means that the bank must rely heavily on the applicant's individuals personal and commercial credit.  No commercial credit?  Issues on the personal credit?  Sometimes you can still get buy without showing financial statements but sometimes you can't. In these situations, tax returns or bank statements may strengthen weak credit, so don't neglect this idea. Generally application only programs have limits of $150,000 purchases up to $400,000 equipment purchases depending on if you have the commercial credit to support it. 

Please leave questions in the comments or email me at [email protected]

    This post will discuss the simplest way to qualify for an SBA Loan.  ​SBA loans reduce the risk to lenders by giving them a gov't guarantee.  This  gives small businesses easier access to capital.  ​
   SBA loans are only for owner operated businesses not investors.  If you are trying to get a loan for one of your apartment buildings you won't qualify for an SBA loan.  If you want to refinance your owner occupied and operated office building you should qualify.  
   There are some restricted industries that can be found here: 

     Most industries are eligible.  Non profits, some financial services, speculative businesses, and other don't qualify. 
​
     Speaking from an underwriting basis, here are some things you would need to get approved:
- Good personal credit (600 min score with limited issues)
- Good cash flow (debt coverage ratio of 1.15 or better)
- 85%+ collateral securing the loan (real estate, equipment, receivables, etc)
- Experience 
- 3yrs of business tax returns (preferred but not required)
- 10% minimum cash contribution to the loan (not required on refinances)
- $5MM or less on SBA 7(a) or $10MM or less on SBA 504 real estate

    SBA loan underwriters can get creative in these areas to help loans get approved so it's always good to check with your bank.  One thing to consider is all SBA lenders are not created equal.  Many local banks underwrite a limited number of these loans each year and are inexperienced.  It's good to find an experienced SBA lender that has the authority to approve these loans in house (local banks don't have this) to speed up the process.  

       This article is not all inclusive, it's best to consult with a banker to see if an SBA loan can help you. 

​-Spencer

      SBA (Small Business Administration) loans are for those looking to start, grow, and keep their business going.  They help us live the american dream of managing a successful business.  SBA loans are government guaranteed loans for business owners.  Meaning that a bank loans you money and if you meet the SBA's criteria, they will back your loan up to 85% if you default.  This is great news for the lender and encourages them to want to make a loan for you.  Funds can be used for working capital, real estate, or equipment; purchase or refinance.  SBA loans are great for all businesses offering long terms and great rates with flexibility toward the collateral backing the loan.  Where is the downside?  Generally, they come at  a price; effort.  SBA loans take quite a bit of time (2-3months) and lots of paperwork.  They are generally worth it if you can survive to process.  There is more generosity when it comes qualifying so many business owners don't have another choice.  Not all SBA lenders are created equal either.  Just because one bank won't make the loan for you under the SBA program, doesn't mean another won't.  Check with us to see if you qualify.  I will also make another post soon on the general qualifications of an SBA loan to see if you meet them. 

The transportation industry is up this year and many company drivers and investors alike are looking to start trucking companies.  Requirements are straightforward for those with trucking experience, but what about investors? This post should give a summary of the requirements for investors to purchase commercial transportation equipment. 

The easiest way for investors to qualify for financing commercial equipment is to have good credit and a large cash reserve. Banks like to see you have enough cash to cover issues before your revenue starts coming in.  $20k + in seasoned cash reserves (checking, savings, retirement, investment accounts, etc) should be a starting point for a used truck.  The more the better.  Personal credit score should be atleast 675 with auto loan and/or mortgage history.  Expect down payments of 15%-25% required by the lender.  

Additionally, a bank will want to know what motor carrier you will be hauling for and who your driver will be.  

For those who lack good credit or bank statements showing your cash reserves, you will need a down payment of 40%-50% and a registered business entity (LLC or INC). 

It has been challenging to get financing for investors with no trucking experience, but this post should manage expectations on lending requirements.  

-Spencer
​Trust Alliance Capital, Inc.
800-763-2810; ext 100

​For now, our bank has been pretty aggressive on trucking equipment that is 3yrs old or newer:

Rates:
7%-11% APR for existing businesses
11%-13% for Startup Truckers

Down Payment:
0%-5% down payment for existing businesses
5%-10% down for startups

Here are the rules:
-2017 or newer truck (as of 1/1/2020)
-min 650 Experian Score with little or no derogatories (this program is for clean credit)
-We will finance sales tax and FET

Turn Around:
-Application + Sales Quote up to $400k (financials needed beyond $400k)
-1-2 business days to turn around an applicaiton


As always this is only one of our programs; we have others for folks outside these criteria.  

​-Spencer

 
I recently got a call from a trucker in Alabama that said he was shocked when his local credit union wouldn't finance a truck for him because he was a startup.  If it is your first time using commercial financing, many banks won't consider your application.

What is required for first time tractor/trailer buyers?  The easiest answer is: bring a good down payment to the table, have good credit, and buy a truck with less than 500k miles; but a rare few hit all these marks. Luckily there are a few finance programs for startup companies that can allow exceptions. In all cases some money for a down payment will help the lender take a risk on a new owner operator.  You may be surprised at one of our newest programs that lets you finance your first truck for $2k-$3k down. Click the button below for our current startup programs, expected payments, and down payments. 

​-Spencer

Most trucking companies borrow money against their accounts receivable (A/R) so they don't have to wait 30-90 days to get their invoice paid.  This is how it works:

1. Submit your bill of lading after you deliver your load, this can be "scanned" with your smartphone or traditional scanner. 

2. We send you up to 90% of the invoiced amount within 24 hours and hold back a reserve until we collect payment from your customer.  

3. Once we collect, we pay you the remaining amount less our fee for the service which is usually 1%-3% depending on the length of time it took to collect payment.  

Most trucking companies participate in some form of  A/R financing often referred to as "factoring".  This money is essential to keep enough cash on hand to pay drivers, fuel, and repairs.  Nobody likes waiting for their money.  

Here are some details about our factoring program:
-Most Important: WE DON'T GET BEAT ON RATES!  In 2015 I haven't seen a factoring company that offers lower rates than us.  Want to see?  Send us your existing contract and we will beat.  Who doesn't love to save money?  

-We give you a fuel card.  This can save you up to $.06/gallon off the cash price at select fuel stations, including Flying J.  

-It is usually 24yrs to get paid on your invoices.  

-This program only services the transportation industry, we are experts in over the road trucking.  

If you aren't factoring, you may be able to grease the wheels on your daily operations.  If you are factoring, we can likely save you some money.  Contact us today to apply.  

-Spencer

UPDATE 1/1/2020: Please check with us on current year models and makes we finance as this post is a few years old. 
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We just rolled out a new finance program from Dump Trucks and Yellow Iron.  WE HAVE MANY MORE PROGRAMS, but few that offer 100% financing. Here are the highlights:

-Application only up to $100,000 ( We reserve the right to ask for full financials if needed)
-Used Equipment up to  15 years old
-Inspection Required
-100% financing available contingent upon acceptable comparable values (may still need first and/or first/last payment up front)

Collateral Age      Term          
2000-2002            36 months
2003-2004            48 months
2005 +                   60 months

Credit Guidelines
-5 years in business
-680 Transunion credit score 
-Favorable credit depth and acceptable revolving debt
-Homeownership

Don't stress If you don't qualify for this program; we have a dozen other finance programs that could work for you, most of them require a downpayment.  As always, check with us first before telling yourself "NO".  

-Spencer

UPDATE 1/1/2020: Please check with us, this post is dated. 

We get calls all the time from borrowers that want to finance a class 8 truck or trailer but don't have a CDL. Here are some situations where we can work this out:

1. The borrower is the owner of the company and has had at least 2-3 years time-in-business. This situation is the ideal; many of our bank partners will consider these loans as long as the business has been cash-flowing (there is enough money to turn a profit).

2. The borrower is a startup with some experience in the trucking industry and has a FICO score 670 or above and money to put down on the transaction; usually 15%-25%.

3. The client is a homeowner or has a net worth over $100,000, has a FICO score over 600, and has at least 25% down.

There are plenty of exemptions to these examples, but in general if you don't fit one of these categories you can always offer more $$ down or collateral.

These examples don't apply to large transactions; $1MM+.  

As always, ALWAYS LET THE LENDER TELL YOU NO, don't assume you won't qualify.

-Spencer

Many of our daily calls come from commercial truck drivers wanting to make the transition to owner operator; how does the financing work?  Financing semi tractors depends on many factors and is different from consumer auto loans.  Commercial lenders look for your ability and the ability of the truck to repay the loan.  Here are the factors that help most often in order of importance:

1. Credit Score - Anywhere above 700 FICO with some depth (cars, houses, credit cards, etc) will get you into the top tier programs for startups, but not by itself.  However, a large share of the commercial truck financing market is made up of those with less than perfect credit. There are  plenty of programs available for people with bad or no credit.

2. Homeownership - Many programs require homeownership, this also adds to your credit depth for item 1, and combined with other factors will help qualify for top tier programs.  Again, not a requirement, there are plenty of programs out there for non-homeowners.  

3. Downpayment - Expect to put money down as a first time truck buyer; this is required in all cases. Programs vary from 5% for top tier programs, to 25% for most programs. 

4. Truck Specifications - The age and mileage on the truck you want to finance matter.  Lenders don't want to put you in a bad situation because then you can't make your payments.  The rule of thumb is no trucks over 700k miles, this is more important than the year of the truck.  Lenders are always making exceptions on older trucks with low mileage, but NEVER make exceptions on trucks with high mileage; even if it is a Peterbilt;-)  The only exceptions I've seen are trucks with rebuilt engines and transmissions. In general a truck 10yrs or newer are preferred, but not always required. 

5. Experience - How long have you been driving?  Generally 5yrs or more will give you the best opportunity.  However, I've gotten customers approved that didn't have a CDL because they fulfilled 3 of the 4 other factors. 

These are some of the things that lenders look at when loaning money to first time commercial truck buyers.  In general, the more factors you fulfill the better, the more likely you are to get approved.  DO NOT GET DISCOURAGED IF YOU DON'T HAVE AN A+ IN ALL THESE CATEGORIES, Lenders can get really creative and it is best to hear "No" from them instead you telling yourself no.  It is important to also point out some deal-killers: delinquent child-support (always), bankruptcies that haven't been discharged yet (most times), and prior auto repossessions (exceptions are made on this with 50% downpayment, or if the repo was voluntary). 

-Spencer