Can a Trucking Company with Bad Credit Get a Loan?

Alternative Small Business Funding

Getting large-scale funding for your trucking company can be difficult if you are unable to get a loan with your bad credit. The good news is that bad credit doesn’t necessarily need to keep you down. There are alternative funding options like a bad credit loan that can help you get the money that you need to get through a difficult time, cover unexpected expenses, or help your business grow. With the right funding options, you can get something that will work for your needs. Reading on, you can learn more about getting a loan even with bad credit for your trucking company.

Can I Get a Loan for My Trucking Company with Bad Credit?

The biggest question that people often have is whether or not they would be able to get loans or other types of funding if they have bad credit. While they may not be eligible for traditional loan options, especially without high-interest rates, there are several different alternative funding options that you can consider. Many of these alternative options factor in more than just your credit, which gives you an opportunity to get the funding that you really need.

Is Credit All That Matters?

Traditionally, lenders take a close look at your credit score in order to determine your creditworthiness. But the good news is that with alternative lending options, they look at the whole picture. They look at things like working capital and other factors, which can help them overlook something like bad credit. This is good news for you if you are struggling to get the funding that you need.

Here are some other areas that alternative lending companies look at to determine whether or not they are willing to offer a loan:

• Revenue

The biggest priority for any lender is whether or not a company has the ability to pay back any loans that they get. If your trucking company has solid and consistent annual business revenue, you look like a good candidate for a loan. This is especially true if your company earns over $150,000 in annual revenue.

• How Long You Have Been in Business

Another factor that they often consider when determining creditworthiness is how long you have been in business. Businesses that have been in business longer, even with bad credit, show that they can be successful. The longer you have been in business, the more likely you can get funding.

• Collateral

A downside of getting funding if you have bad credit is high-interest rates and hesitancy on behalf of the lender to get you the money you need. By having collateral that you can put up for your loan, you can be more likely to get the funding and end up with lower interest rates.

• Any Other Business Debt You Currently Have

One of the things that a lender will look at is whether or not you have any outstanding business loans. If you are current on all of your bills and other loans, the lender will look at this favorably. This can even balance out any bad credit that you may have.

• Solid Business Plan

Are you trying to get a new truck to grow your business? Creating a new business plan with any capital expenditures that you intend on buying with the money can be a great tool to help you get a new loan.

As you can see, you have plenty of other ways that you can impress a potential lender and getting the loan that you need. Even if you have less than stellar credit.

Different Options for a Trucking Company Business Loan

Fortunately, you have plenty of options to choose from when you are looking for loans for your trucking company. This section will take a closer look at some of your best options.

SBA Loans (Small Business Administration)

SBA loans are loans that are backed by the government, which means that there is a great opportunity for trucking companies that can’t qualify for traditional loan options. These are flexible lending options that allow you to use the money in how you see fit for your business. There are a few different SBA lending options that you can choose from. Here are some great SBA options:

• SBA Microloans

If you only need a smaller amount of money, it can be harder for you to qualify for traditional loans. The SBA Microloan program was made for these situations. The average amount of money that gets distributed from the Microloans is around $13000. The funds from these loans can be used for working capital, buying equipment/machinery, or any additional supplies that you may need.

• SBA 504 Loans

This isn’t the most versatile option that you can get with SBA loans, but it’s a sufficient enough loan to cover purchasing any heavy equipment that you may need. This option has a fixed-rate financing term, and it is a long-term loan if that’s what you’re looking for.

• SBA 7(a) Loans

This option is the most commonly selected SBA loan offering. This is because small businesses can get upwards of $5 million for practically any purpose that they need for their business.

Business Line of Credit

Another option to consider is a business line of credit. Similar to the model used by credit cards, the borrower gets a set limit of what they can borrow from the lender. They can use as much or as little of this line of credit as they want/need. You will only need to pay any fees and interest associated with loans on the money that you actually borrow from the line of credit. You can pay it back and then reuse it or keep using the credit until you have no more available in your line of credit.

What’s even better about a line of credit is that you can really use it for anything that you need for your business. It’s also good to have on hand in case an emergency comes up and you need to be sure that you have available funds to cover those unexpected costs.

Business Credit Cards

You can also opt for a business credit card, which businesses should typically have on hand anyway. This also gives you a line of credit that you can be used for whatever you need, as you need to use the money. This is not only great for when an emergency comes up, but this is also great because you can build up stronger credit thanks to your credit card as long as you make your payments on time. Plus, with some business credit cards, there’s also the added benefit of perks you can use from your credit card, such as points or cashback.

Equipment Financing

There are 2 different options within this category: equipment leasing and equipment loans. Both of these are used to purchase equipment, in this case, things like additional trucks. With equipment leasing, you never actually own the truck (or other equipment). You are basically just renting this item from the lender, with the option to upgrade to a newer model at the end of the lease or to just own it when you pay it off. With equipment loans, you are using that money to buy a specific big-ticket item that your business needs. Once you finish paying back the loan according to your terms, you will own the item.

In both cases, you are using the equipment that you are getting as collateral for the loan. If you don’t make the payments, the lender will take back the equipment to recover as much money as they possibly can. The point of equipment financing is to make it so that you can get the equipment that you need, through payments that are more affordable for your business.

Short-Term Loans

Generally speaking, these are loans that are paid back within a year. The exact time that these loans are paid back can depend on what your specific terms are, but these loans never take more than a year to pay back in full. Before you decide on this loan, it’s important that you carefully consider it before taking the plunge. Short-term loans are easily among the most expensive funding options, which is why they should only be used when absolutely necessary.

You can get your money within 24 hours with this type of loan and it’s ideal for situations where an emergency comes up and you need to cover those unexpected costs. If you have low credit, this can be sometimes one of your only options. But you still have to put in some serious thought as to whether or not this is really the best choice for your needs.

Invoice Factoring

If you are a trucking company that deals with invoices, invoice factoring can be a great option to consider. This isn’t necessarily a loan, as far as what traditional loans look like. Rather, you sell your unpaid invoices to the lender, who will buy them from you. They will buy these at a discount, taking out any fees associated with the transaction. This gives you money without having to wait for those invoices to be paid. This can be an especially great option if you have multiple invoices and do not want to go through the process of applying for financing.

Increasing Your Chances of Qualifying for Trucking Loans

Now that you know the different options for trucking loans that you can consider, this section will help you understand the things that you can do to increase your chances of getting the funding that you are looking for.

Gather Essential Financial Documents

While alternative funding does typically require less paperwork to get approved, it doesn’t hurt to make sure that you have as much as possible on hand. It’s always better to have too much documentation than not have what you need. Some documentation that you should be sure to have before you contact a lender includes:

• Most-recent financial statements
• Business plan that shows how this investment can increase profits
• Your credit report, after you look over it to correct any mistakes

These are just some of the basic things that you should have on hand when you are working with a lender to improve your chances of qualifying for a loan.

Find a Suitable Lender

Not every lender is going to meet your needs. There are a lot of lenders who don’t even want to work with trucking companies with bad credit. A traditional lender has a lot more restrictions and requirements, which makes it harder to get loans through them. Alternative lenders tend to be a bit more lenient, often overlooking bad credit and considering other factors.

Find Out About Prepayment Penalties

Loans when you have bad credit will sometimes have higher interest rates. This gives you extra incentive to pay the loan back as soon as you can. If the loan helped you buy items that gave you a significant boost to your profits, you will be able to potentially pay back your loan sooner rather than later. However, there are some lenders who will charge you prepayment penalties should you decide to pay back your loan before you were scheduled to. Ideally, you will want to work with a lender who doesn’t charge these prepayment penalties.

Make Sure You Stay Current with Loan Payments

It’s crucial that you are staying current with any of your loan payments. Not only can this help you build up your credit and increase your chances of qualifying for loans in the future, but there can also be the risk of losing trucks or other equipment if they were used for collateral. Paying your loans on time is one of the most important things that you can do for your present business and for the future of your credit.

Look into Refinancing

Finally, consider refinancing. This is an option where you can take a current loan that you are paying off and get a new one with different terms. Ideally, this will mean that you can get more favorable terms.

Conclusion

Bad credit doesn’t have to hold your trucking company back from achieving its goals. These alternative lending options can be the perfect opportunity to help your business grow and succeed. You just need to carefully consider what your needs are and determine which funding options can help you best meet these needs.