What financing options does a trucking business have?

What are the main types of trucking financing?

Here is the short version. Each row links to the page that goes deeper.

The products have different costs, paperwork, and risks. Two that look alike on the surface, like factoring and receivables financing, can leave very different obligations with you. Our financing hub has one card for each.

Which products pay for trucks and trailers?

Equipment financing is the usual answer for a unit. It comes as a loan, where you build ownership, or a lease, where the end-of-term terms decide whether you keep the truck. The unit serves as collateral, so the truck's age, mileage, type, and price shape the offer along with your own history. For the detail, read how truck and equipment financing works, whether to finance or lease, and how a TRAC lease, a $1 buyout lease, and a loan differ. Looking at an older unit? See financing a used truck.

SBA 7(a) loans can also pay for equipment. SBA says 7(a) proceeds can be used for machinery and equipment, working capital, real estate, refinancing, and changes of ownership, and the maximum 7(a) loan is $5 million. A bank or other lender makes the loan, and SBA guarantees part of it for the lender. Expect more documents and more time than with an equipment finance company. See whether a trucking company can get an SBA loan.

Which products cover cash gaps?

Trucking costs land before the freight pays. Fuel, insurance, repairs, and payroll are due now, and brokers often pay weeks later. Three products are built for gaps.

• Working capital is a lump sum for a one-time cost: a major repair, an insurance down payment, a slow first month. Many offers state cost as a factor rate and a fixed payback, not an annual rate, so convert before you compare.
• A line of credit fits a gap that shows up every month. You draw what you need, repay, and draw again, and you usually pay interest only on what you have drawn. Lines get reviewed and renewed, and the limit can change.
• A merchant cash advance is not a loan. It is generally structured as a purchase of your future receivables. The provider pays a lump sum and collects a fixed total, usually by daily or weekly withdrawals from your bank account. FTC staff have described these products as often high cost and said some small businesses underestimate what they pay. If one is on the table, read what a merchant cash advance is, and whether it is safe and the difference between APR and a factor rate first, and look at factoring, which works off loads you have already delivered.

Which products turn unpaid invoices into cash?

If your problem is waiting 30 days or more on brokers and shippers, these three work off your receivables.

• Factoring sells your invoices. The factor advances part of the invoice now and pays the rest, minus its fee, after your customer pays. The decision leans on your customers' credit, which is why new authorities often look at it early. Recourse terms decide who absorbs a customer that never pays. Start with how freight factoring works, then what it costs and recourse vs non-recourse.
• Accounts receivable financing borrows against your invoices instead of selling them. You usually keep the customer relationship and collections, and you stay responsible for repayment whether or not your customers pay.
• Asset-based lending is a larger loan or line where what you can borrow moves with the value of your collateral. The OCC describes advances as limited to a percentage of eligible collateral, called the borrowing base, and calls close monitoring an essential feature. It tends to fit established fleets and brokers with a big, steady book of invoices.

Where do fuel cards fit?

Fuel cards are a payment tool more than a financing product. Some let you pay later; others are prepaid or tied to a bank account and are mostly about controls and records for fuel tax reporting. We explain them on the fuel cards page, but we do not currently route fuel card requests to anyone.

What do providers look at, whatever the product?

Each provider sets its own standards, and the weight on each item changes by product. These come up across most of them:

1. Time under your own authority. Many providers look at when your authority became active. A new authority has fewer options on most products, though factoring and some equipment providers work with first-year carriers.
2. Revenue and deposits. Recent business bank statements show what comes in and how steady it is.
3. Credit. Business and personal, depending on the product and how long you have been operating.
4. Collateral. The truck or trailer for equipment financing, your invoices and customers for receivables products.
5. Down payment. Mostly for equipment financing. A bigger one can change what a provider will consider.
6. Existing debts and liens. Other financing, especially anything with a claim on your receivables or daily withdrawals from your account, affects what a new provider can do.

Have the basics ready before you start: your MC or DOT number and authority date, recent bank statements, a list of the brokers and shippers who pay you, and details of any unit you want to finance. No one can promise an offer. A request lets third-party providers tell you what, if anything, they can do.

How do I compare offers across different products?

Products state their cost in different ways: an interest rate, a factor rate, a flat fee per invoice, a fee per period. Put them on the same footing before you choose.

• Total cost. Add up every dollar you will pay back, minus what you receive. That is the cost, whatever the label.
• Time. The same total cost over three months is far more expensive on an annual basis than over a year. Our APR vs factor rate post shows the math.
• Fees. Origination, documentation, minimum volume, early termination, and late fees all count. Ask for every one in writing.
• Contract terms. Personal guarantees, liens on all business assets, auto-renewal, and what happens if you pay early.
• Required disclosures. Some states require certain commercial financing providers to give a standard cost disclosure. California and New York, for example, require an estimated annual rate among other items for specific transactions. Where one is required, use it to compare.

The FTC says a fee collected before a loan is granted is a cue to walk away. Be wary of anyone who wants money up front or will not put terms in writing.