Buying a truck is a huge investment that requires loads of money. If you don’t have enough funds, you can opt for a truck loan.
Basically, lenders find these loans less risky than business loans, particularly because the vehicle acts as collateral.
However, lenders will need to review various factors to prove your eligibility before issuing the loan. Here are some of the factors that the lender may consider. Visit this link https://steadmondfinance.com.au/truck-finance/ for more details.
- Credit Score
Your credit score will determine the amount of money you will receive. The higher the score the better the chances of qualifying for a higher loan with low interests and vice versa. Start by checking your company’s credit score together with your personal credit history. If you have bad credit there are various ways you can improve it and increase your chances of qualifying for a loan.
- Proof of down payment
The risks involved in financing a truck are high, therefore most lenders will want you to make a substantial down payment first. Typically, only a few lenders will agree to finance the entire cost of the vehicle. Borrowers with a down payment of approximately 30 % of the vehicle’s value stand a better chance of getting financed by most lenders.
- Overall cash position
Aside from making a substantial deposit, the lender will want to know how much money you have in your bank account. Your account balance should be enough to cater for at least three months’ payment in case you experience an unexpected delay in your cash flow. This reduces the risk for lenders and assures them that you’re able to make timely payments.
- Basic business information
Your lender may ask you to provide some of the most essential business information including certificates of incorporation, tax returns, business licenses, purchase orders, profit and loss statements bank statements, customer contracts among others. These documents are meant to prove whether or not your business is eligible for the loan or whether it is too risky to finance.
Normally, the vehicle is used as collateral for financing the loan. For this reason, the lender will want to know if the truck is insured in the event, it gets damaged. Having truck insurance shows that you are a serious and reliable borrower. Some of the things included in the Commercial trucking insurance are cargo, liability, and physical damage insurance.
- Time in business
While this might not be necessary, the lender will want to know how long you have been in business. The time in business is proof that you’ve been making money for a while hence probabilities of getting a steady cash flow are also high. The longer you’ve been in business the more appealing you will be to your lender.
- Type of truck
There are different types of trucks with different uses. Your lender will want to know how you will be using your truck. Do you want a truck for long-distance hauling or just a simple truck for local deliveries? Long-distance vehicles are thought to carry more risk due to frequent repair and maintenance. You might have to hire a mechanic on call as a backup solution in case you opt for a long-distance truck. This way the lender will be less concerned about the truck’s safety.
- Where you’re buying the truck
Lastly, you might want to consider where you will purchase your vehicle before applying for the funds. Lenders prefer borrowers who purchase their vehicles from reputable dealers rather than a private entity. You are most likely to get a well-maintained truck whose condition is solid when you buy from a known vendor. This minimizes the risks involved for the lender. Click here to read more about vehicle financing.
Although it might cost you a fortune to secure a commercial truck for your business, having one can help propel your business to a higher level in terms of expansion. Commercial truck financing offers both small and large businesses with little funds an opportunity to own a truck. To qualify, the lender will want to check and verify your credit score along with other factors mentioned above. If you are ready to apply for the loan, make sure you have read and understood all that is required to receive the funding.