How to Finance a Tractor Trailer / Semi-Trailer truck as a New Start- up Business with or without a Commercial Driver’s License

An increase in online shopping has been creating many opportunities for the trucking business.  The need for trucks and drivers to transport goods is at an all-time high. Businesses such as FedEx and Swift are looking for truck owners to work as independent contractors to help with the increase in business volume.  FedEx Custom Critical is growing its fleet. Swift transportation also has a non-employee / owner operator compensation program. Drivers with a commercial license might be interested in purchasing a truck and running their own trucking business, rather than working for someone as an employee.  Entrepreneurs who may not have a CDL would like to take advantage of the increased need for transport and are considering purchasing a fleet of trucks and hiring drivers.

What are the challenges in obtaining financing for a tractor trailer truck or a fleet of trucks?

Start-up businesses often find themselves being turned down for equipment financing because they have not yet been in business showing corporate tax returns for two years.  Many equipment financing providers want to see two years of experience before financing expensive equipment. Alternatively, others turn to the truck vendor for financing. Most truck vendors work with financing companies that require the purchaser of the truck to be the owner and operator (must have the CDL in place).

What happens if the owner of a new business wants to invest in the trucks and hire licensed CDL Drivers?  This occurrence did come up with one of our borrowers recently. He was declined elsewhere for an equipment lease and loan due to being a start-up business.  Additionally, the dealer from whom he was purchasing the truck refused to work with him on financing because he was not going to be the driver of the truck with the CDL in place.  He came to us for guidance and we were able to help him obtain the financing he needed. The business owner in this case and in other scenarios may want to be an overseer of the business and involved in the sales and logistics of the trucking company, but not necessarily be the driver of the truck.  We were able to offer a solution for this borrower and wanted to let others know that we can help.

An SBA loan can be used to finance a tractor trailer truck or a fleet of trucks

If an individual without a CDL would like to purchase a truck or several trucks, an SBA loan can be used to purchase the equipment.  The SBA itself does not have a hard and fast rule about the owner of a trucking business being required to have a commercial driver’s license.  Lenders themselves may have their own internal corporate regulations that will determine whether or not they require the borrower to have a CDL.  The key is to find an SBA lender that will not require the owner of the truck(s) to have the CDL. The trucks are valuable assets and are usually the collateral for the SBA loan.  If the business owner (borrower) can inject a 20 to 25% down-payment, the SBA lender will finance the balance of 75 to 80% of the truck or fleet of trucks. Additional personal collateral may or may not be required.  It will depend on the project total cost and breakdown of the costs by category. If a fleet of several trucks is desired, there are SBA lenders that will allow a slow roll out of several trucks to be financed in one loan transaction as long as the purchase of each truck (one or two at a time) is completed within a period of 90 days.

You may qualify for an unsecured non-SBA loan with excellent credit and verifiable income

If your business needs $150,000 or less to start-up or expand, it might be a good idea to consider the alternatives to SBA loans.  The approval and closing process for the Unsecured Bank Loan is quick.  It does not depend on outside factors like SBA franchise approval, franchise growth or financial performance reports.  The borrower does not need to provide a hefty down-payment or equity injection and the rates and terms are comparable to SBA rates and terms.  Additionally, the Unsecured Bank Loan, which requires no collateral, offers rates that are fixed, instead of variable.  Learn More about the unsecured business loan program.

Consultation with a Business Financing Advisor

An SBA loan can also help a driver with a CDL to purchase his or her own truck, enabling a new business to be born.  Several things will be required of any new businesses owner when working with an SBA lender. It is wise to obtain assistance from a knowledgeable Business Financing Advisor who is well-versed in SBA requirements and the rules and regulations of each lender.  The borrower should consult with his or her advisor for help with putting together a business plan and projections as well as organizing the lender application. A borrower can save a lot of time by getting assistance from the advisor on which lenders are best for financing the truck or fleet of trucks with an SBA loan.

It is a good idea to get an underwriting approval or a commitment letter from the lender before moving forward with some of the time consuming and costly items that will be part of the closing process.  Some lenders will require these things before underwriting and others will allow the list to be part of closing. Your Business Financing Advisor should know the process required by each of their lender partners.  The borrower must register a legal business name in the State in which they reside. The business must be an LLC or a Corporation (S or C Corporation). The business must also get an EIN from the IRS. The SS4 form provided by the IRS is the evidence that the lender will need. The lender will also need proof of Business General Liability Insurance and Business Personal Property Insurance being activated prior to the loan closing. There are a number of other items on a lender closing checklist that will be required.  The lender processor and your Business Financing Advisor should be able to help answer questions and offer guidance on all of the items required for closing.

Whether you are planning to work as an Independent Contractor for Swift Transport or FedEx or if you have your own clientele to provide trucking services to, we can help you with the process of obtaining the right financing for your project.  Complete the pre-qualification questions here on our website and we will be in touch shortly with further questions or to schedule a call to discuss details about how to begin the process.