Small Business Loans for Specialty Trucking Companies

Like any good truck company owner, you’re likely intimately familiar with the direct correlation between economic conditions and the demand for specialty trucking services. This correlation may explain why a report found that, from 2015 through early 2020, the specialty trucking industry contracted by 3.1%. During this period, especially in 2018, economic experts warned of an oncoming recession, which led to a shrinking industry. Even these experts, though, could not have predicted the COVID-19 pandemic and its attendant economic consequences.

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Shortly after the COVID-19 pandemic began, a revised version of the aforementioned report projected that the specialty trucking industry revenue would contract 13.4% in 2020. The report named over-capacity and decreased consumer spending as major factors in this decline, even as shopping habits shift to increased online purchasing.

However, demand for goods that require specialty trucking, such as food, oil, and automobiles, will always exist to some extent, so that the industry will exist even during economic downturns – and that’s thanks in part to small business loans for trucking companies. Below, learn how to get low-cost funding for your specialty trucking business.

What is Specialty Trucking?

Specialty trucking is a form of freight transportation in which goods are shipped in containers that are atypically shaped, climate-controlled, or otherwise different from standard shipping methods. Oils, grains, frozen foods, and other everyday goods are usually transported via specialty trucking.

Financing Options for Established Trucking Companies During the COVID-19 Coronavirus Pandemic

When the COVID-19 pandemic led to economic shutdowns throughout the U.S. in March 2020, the federal government quickly passed the CARES Act. This bill included the Paycheck Protection Program (PPP), which the Small Business Administration (SBA) launched to provide additional SBA 7(a) loans to companies suddenly struggling to stay afloat.

Visit the SmartBiz Small Business Blog for information about loan forgiveness and new opportunities. Additionally, visit the SmartBiz Loans COVID-19 information center Small Business Loans & Resources in Times of Coronavirus (COVID-19) to learn how you can use PPP funds for your trucking company.

Applying for a first or second PPP loan in 2021

The SmartBiz streamlined PPP Loan application can help you fill out your application, upload required documents, and submit them to the bank quickly.**

SmartBiz can help you apply for these funds. We have specialized in SBA loans since 2013 and our network of banks has funded nearly $4 billion in SBA, PPP, and bank term loans.

Whether this is your first or second PPP loan, SmartBiz can help! Businesses with less than 500 employees that are negatively impacted by the pandemic can apply for their first PPP loan.

The program expires on May 31, 2021. No applications will be accepted after that date. Keep an eye on the SmartBiz Small Business Blog for updated information about an extension if approved by congress.

Funding options for trucking companies

Specialty trucking is a large industry with many companies – after all, many everyday goods, including fresh food and oil, require specialty trucking. This competition partially explains trucking companies’ longtime funding obstacles.

Despite the challenges of obtaining small business loans for trucking companies, you still have options. SBA loans may be especially useful for your company, but you can find other funding opportunities beyond government programs. Your options are listed below, and each possibility has different loan rates and approval periods.

The SBA 7(a) loan program

Many lending experts advise business owners in all sectors to obtain low-cost SBA 7(a) loans for their funding needs. If you qualify for these loans (a list of basic requirements can be found later in this guide), you will have low monthly payments and rates, plus your payment terms will be favorably long. As such, SBA 7(a) loans are great for saving money, hiring new employees, and growing your trucking company.

You can use your SBA 7(a) loans for the following purposes:

  • Working Capital – Working capital is the metric most indicative of your company’s business success. It is the difference between your current assets and your current liabilities, thus making it the most important indicator of your company’s stability. A negative difference indicates a need for additional funding, for which an SBA 7(a) loan is ideal. Use your loan to hire new employees, buy new equipment, and close your working capital gaps.
  • Commercial Real Estate – SBA 7(a) loans can go toward owner-occupied commercial real estate purchases, including a second location for your company. You can also use SBA 7(a) loans to refinance your current commercial real estate mortgages.
  • Debt Consolidation Loans – Through debt consolidation loans, you can refinance loans in your company’s name. Whether merchant cash advances, daily or weekly payment loans, high-interest business loans, or short-term business loans, your SBA 7(a) loan can go toward several kinds of debt consolidation.

Advantages of SBA 7(a) loans for trucking companies

SBA 7(a) loans are widely viewed as the “gold standard” of small business loans for the following reasons:

  • Low rates
  • 10-year terms (25-year terms for commercial real estate loans)
  • Affordable monthly payments
  • Wide use of funds
  • No prepayment penalties
  • Availability in all 50 states

Loans with these qualities make achieving stability, growing your company, or expanding your team far easier, not to mention more affordable.

Requirements for trucking companies to apply for SBA 7(a) loans

Below is a list of common SBA 7(a) loan requirements you will likely encounter as you seek funding for your trucking company:

  • Your company must be based in the U.S.
  • Your company must be at least two years old
  • You must be a U.S. citizen or lawful permanent resident
  • You must be at least 21 years old
  • Your personal credit score must be above 650
  • You and your company must be on-schedule with all government-related loan repayments
  • Your company must not have outstanding tax liens, recent settlements, or charge-offs
  • You must not have foreclosures or bankruptcies in the past three years

While these criteria are the most common you’ll see, different lenders typically have different criteria. For instance, many lenders demand that borrowers share their business plans, but SmartBiz Loans, among others, does not.

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How to apply for an SBA 7(a) loan for your trucking company

Step 1: Check that your trucking company meets the above SBA 7(a) loan requirements. Consult the SmartBiz Loans page on SBA Loan Requirements for Existing Business for additional assistance.

To discover how your business financials stack up for funding, use our easy-to-use online tool. SmartBiz Advisor™ helps you track the financial health of your business and learn how banks typically evaluate your business.* SmartBiz Advisor also recommends ways to help you improve your credit and strengthen the financial health of your business as needed. Read feedback from real SmartBiz Advisor users and sign up here.*

Step 2: Collect all your paperwork – there might be a lot. Your accountant, bookkeeper, or another financial expert can help you with this step.

Step 3:  Choose your lender. The following considerations are the most important:

Availability

Choose a lender who links you with a representative regularly available via email or phone. If your representative appears unfamiliar with your loan application, company, or industry, request a different representative or find a different lender.

Transparency

All information about your APR and annual interest rate should be clear from the start. Transparency of this sort is key – don’t use lenders who appear to have something to hide.

Obvious loan terms

Similarly, complex loan terms may be a sign that you should look elsewhere. Fine print that makes your head spin can hide unfavorable loan costs and payment schedules. Your agreement should instead clearly state a total loan amount, required payment frequency and amounts, collateral requirements, and any applicable prepayment penalties.

Fees

Other than repayment and interest fees expect few other charges. Numerous charges may indicate that you should choose a different lender, as do provisions stating that your fees are due after loan funding or your loan’s lifetime.

Strong reputation

It’s more than the above that makes a good lender. Check what people say about your lender on TrustPilot, Consumer Affairs, and Google. Good reviews, especially from other trucking companies, are a good sign. Bad reviews mean it’s time to look elsewhere.

The SBA 504 loan program

If you need money for expansion or modernization projects, you can apply for funding through the SBA 504 loan program. Through this program, you can raise funds for commercial real estate purchases and pursue additional funding from your local community development corporation (CDC). If your trucking company meets your CDC’s goals, then your CDC will cover as much as 50% of project costs and your 504 loans will cover up to 50%. You’ll pay the remaining amount via your own down payment.

The SBA microloan program

If your trucking company counts as a very small business or microbusiness, you can apply to the SBA Microloan Program. If your application is accepted, you will receive at most $50,000, which you can use toward all business expenses besides debt payments and commercial real estate purchases.

Non-SBA loans and other funding options

If you don’t qualify for government funding, you have other funding options, though these funding routes may have shorter terms, higher rates, and larger payments. They include:

Bank term loans

Bank term loans can offer you funding as quickly as SBA loans, but with fewer application requirements. Use your loans to refinance your debts or obtain working capital. Ask term loan providers about their possible loan amounts, rates, prepayment penalties, and repayment terms before proceeding.

Merchant cash advances

If your trucking companies accept credit or debit card payments, consider pursuing a merchant cash advance (MCA). This form of funding is easy to repay: You’ll either funnel a small portion of all transactions back to your lender or make regularly scheduled payments instead. However, your APR will likely be extremely high. Learn more about MCAs via the SmartBiz Loans blog What You Need to Know About an MCA.

Business lines of credit

Business lines of credit are revolving lines of credit intended for your trucking company’s use for all kinds of needs. Although you’ll receive less funding than through a bank loan, an MCA may be advantageous in certain situations.

If you’re worried about interest, you may like that business lines of credit only charge you interest on money that you actually use. Additionally, since most business lines of credit are unsecured, you likely won’t have to put down collateral to obtain them. You may also be happy to know that you don’t have to use all the money in your line of credit, just as with credit cards.

However, business lines of credit cards differ from credit cards in two major ways: Business lines of credit expire after you reach their maximum, and they don’t have spending rewards. Read all about business lines of credit via the SmartBiz Loans blog Small Business Lines of Credit Pros and Cons.

Why Choose SmartBiz Loans?

Need funding to rebuild your business? Don’t waste time going from bank-to-bank filling out multiple applications. SmartBiz helps you find the best financing for your unique needs whether that’s an SBA loan, Bank Term loan, or other financing. About 90% of qualified applications we refer to banks are funded and our financial professionals are on hand to answer your questions. Discover if you’re pre-qualified here without impacting your credit scores** and read the SmartBiz 5-star customer service reviews on TrustPilot.

 *The information provided through SmartBiz Advisor, including the Loan Ready Score, is for educational purposes only. SmartBiz Advisor is not a financial or legal advisor as defined under federal or state law. Use of this information is not a replacement for personal, professional advice or assistance regarding your finances or credit history.

**We conduct a soft credit pull that will not affect your credit score. However, in processing your loan application, the lenders with whom we work will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and happens after your application is in the funding process and matched with a lender who is likely to fund your loan.

 What you need to know: The information provided through SmartBiz® University and the articles contained therein are for educational purposes only. Use of this information is not a replacement for personal, professional advice or assistance regarding your finances or credit history.