Semi Truck Leasing with bad credit or Financing has gotten tougher and tougher over the past 10 years. Lenders look at the Trucking/Transportation Industry as “Higher Risk”. The defaults in this industry are much higher than any other in the US. But financing a truck or trailer with good or bad credit should not be more of a headache than its worth. Here is a quick guide to help you understand the programs and items you need to help your transaction get the approval you deserve. To get the biggest amount of money for the least amount of trouble, here’s what you can do.
At Axe Business Funding we listen to your story. We do not have a set criteria that we try and fit you into but rather structure a deal that works best for you and your business, challenged credit and bad credit semi truck financing & Leasing is what we do! We work with ALL credit types in an effort to get you into the truck or trailer your business needs.
1) Semi Truck Leasing with Bad Credit Vs Financing
Leasing a commercial truck or trailer has many advantages and the biggest would be the business tax advantages. A lease is looked at as a rental and payments are deductible if the transaction is structured correctly. Depending on this structure you would still own the truck at the end of the term.
Financing a truck or trailer has its advantages as well though not as much as leasing. You can accelerate depreciation and write off a small amount of the interest paid through out the term of the loan. These loans have a simple APR and principle and interest payments are made each month. These loans have a slightly lower monthly payment but the tax benefits are far less.
2) Credit Types- Whats Yours?
Credit tiers range from lender to lender but they are typically the same. Understanding your credit goes beyond just your score. Lenders look at much more then that.
They are looking for: A) Credit Depth, how long your credit history dates back. B) Total amount of current debt, how much debt you currently have based on your available credit limits C) Comp Credit, do you have any other loans within the dollar amount of your current submission D) Active Tradelines, how many open and active trade lines you currently have E) Pay History, have you paid your current or past trade lines on time.
Credit Score ranges most lenders follow are:
800-720 “A” Tier Credit
720-680 “B” Tier Credit
680-620 “C” Tier Credit
620-600 “D” Tier Credit
Below 600 = F Credit or High Risk
3)How to Get Semi Truck Financing With Bad Credit
If you’ve had some lates or minor hiccups on your credit then it may not be that bad and you may qualify for more than you think. If you have very limited credit but no derogatory items then you still fall into the high risk credit grade because “no credit is still bad credit”.
So How do I get approved for semi truck leasing or financing?
Well depending on the number of years you’ve been an Owner Operator and how many trucks your currently running may be a big factor. With these types of higher risk loans they will usually require more money down than the 740 Credit customer. These down payments will range from 20-40% of the purchase price of the truck or trailer. This down payment helps the lender secure their interest in the transaction thus bringing down their risk of loosing money if the deal defaults. As we all know lenders are in the business or loaning money to make money.
What if I’m a Start Up Trucking Business?
These deals can be tricky and can depend on a lot of factors such as credit, CDL experience, if you have contracts waiting and so on. Start Up businesses are risky to begin with as the lender has no idea if you know how ro run and operate a successful business. If it was easy everyone would be doing it. These deals are not impossible to get done and if you’ve been turned down with this type of loan then maybe looking for the right lender is the way to go, Axe Business Funding does all these types of loans discussed here.
4) What do You Need To Submit a deal?
For most Application only programs you need the following items: Application, last 3 months of business bank statement, and invoice or quote for the equipment. If its a Challenged Credit semi truck financing deal you may need hauling contracts or personal financial statement to help make the deal more appealing.
For transactions over 75K you will need the above items and most likely the last 2 years of tax returns as well.
5) Know your lender!
There are thousands of lenders out there but very few that specialize in trucking/transportation. You want to work with a lender that understands not only your industry but the equipment your looking to buy. A lender that specializes in trucking should have an array or products to offer, some lenders only have 1 or 2. Axe Business Funding is just that lender! We offer products for A credit thru F Credit and we have programs for Start Up Trucking. We can find a program that is fitted to your needs and budget.