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Obtaining Semi Truck, Big Rig and Over the Road Truck Financing

By JM Luna

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Published: 09Jun2008
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There are many alternatives in obtaining semi truck financing. Whether you are a start up or a seasoned business, the first logical place to investigate your financing is at your local bank. This may be a pleasurable experience if you have many contacts at your bank but most people usually don't have these types of connections. The seasoned or fleet operator must have at least mid 600s on their credit scores and be prepared to go through a long paper process. Prior year tax returns are required, current personal financial statements needed, interim financial statements and other banking information pertaining to your business and personal bank balances are required. The start up business must have a credit score properly 680 or higher and will have a much smaller success rate in obtaining bank financing. The business start up is a much higher risk factor and must adhere to tougher lending standards than the seasoned or fleet operator. Additionally, the lender may require that the prospect borrower be incorporated prior to document submission.

Most banks offer loan and/or lease programs. The difference is that the loan program transfers title at the end of the payment obligation, whereas the leasing component offers a rent type environment during the course of the lease with a buy out option at the end of the lease period to take title. Usually, the monies required upfront to acquire a loan are higher and eliminates many candidates. The Leasing arena requires anywhere from usually first and last payment to approximately 30% down of the acquisition cost depending on the applicant and the risk factors determined by the lender. As the economy has become weaker and the risk factors have become higher, it isn't uncommon to see up to a 30% down payment required on a start up situation. Additionally, some lenders will not finance an over the road truck that is over five years old as well. The standard for others may be ten years. Other niche lenders may require lower credit scores, such as 550-650 but their interest rates may range between 20-40% depending upon the application's time in business and personal credit scores..Once again, the front money can vary from lender to lender.

On the loan and lease programs for a semi truck applicant, the borrower must investigate whether the bank and/or financial institution considers this a qualified asset which they will lend on. Most lenders don't like this type of asset, they consider it high risk and would prefer to lend on more traditional type assets like bulldozers, dump trucks, excavators etc. Other niche lenders specialize in other industries such as transportation only which may include limos, limo buses, ambulances and over the road trucks as described here. Loans and leases usually run anywhere between 36 -60 months based upon the age of the semi truck.

The semi truck applicant is seeking a relationship with the lender no matter whether it is a start up or seasoned business. The front money to commence the lending vehicle, the monthly payments and the buyout clauses at the end of the lending instrument, if there is one, is paramount in making a prudent business decision. The amount of paperwork and hoops to jump through to get to end of the financing process must be considered in the total evaluation process.

As we discussed above, there can be a long drawn out paperwork process to obtain your financing. Recently, some of the lenders have changed their computer qualification models and require application only programs This means that there are no income tax returns required, time consuming personal financial statements needed, and other key documents either prepared and /or requested. This program is usually geared for the seasoned or fleet operator business but there are also start ups programs available from some lenders. These application only lending programs run as high as $250,000 for available financing. It is important for the semi truck applicant to check out all the lending programs available. The collateral on a financing deal is usually the over the road truck acquisition, additional collateral isn't required but may be looked at for weaker applicants. The minimum credit score required for all semi truck applicants may run as low as 575 if there are off lease and repos available.

The last thing you should be aware of is dealer/financing inventory programs. What this means, the lender has repos and/of a off lease inventories that they want to move for cash flow purposes. This financing arrangement is geared to the start up as well as seasoned business and may offer the over the truck applicant an excellent buying and financing opportunity. Some programs offer as little as first payment only to get the owner operator into the deal. Check around and see what is available. It could save you thousands..

When you are shopping for an over the road truck financing, consider the following, the front money, the monthly payments, what collateral is required, the insurance coverage, and what the buyout clauses mean. Also, make sure you have a good source of income coming from a contract and/or other methods to support your debt financing and gasoline costs.

Happy hunting for your over the road truck and its related financing.....

J.M Luna has over thirty years in the financial field. This includes accounting and taxes, leasing and commerical and hard asset money loans. U.S Corporate Capital assists the start up as well as the seasoned business. http://www.cclgequipmentleasing.com/trader.htm

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