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A carrier called me last spring with a problem. A well-known shipping company had offered him a dedicated lane and five loads per week. It was steady business he was ready to accept. But he only had three trucks, and the lane needed four.
This is a common challenge for trucking business owners. You need a truck, a driver, and enough working capital to cover the cost of gas and other operating expenses, all on a very short timeline.
I've spent more than 15 years helping small to midsize business owners work through challenges like this. The most common mistake I see truckers make is borrowing the wrong way.
Below, I'll get into some common ways to finance a trucking expansion, what it costs, what lenders review, and how to pick the option that fits your needs.
| Financing type | Typical amount | Repayment terms | Rate | Funding speed |
|---|---|---|---|---|
| Equipment financing | Up to 100% of equipment value | 12 to 72 months | As low as 6% APR | 1 to 5 days |
| Short-term business loan | $10,000 to $5 million | 6 to 36 months | As low as 6% APR | As fast as same day |
| SBA 7(a) loan | Up to $5 million, or $10 million combined with a 504 loan | Up to 10 years for working capital, up to 25 years for real estate and long-life equipment | Starting at 6.75% | 30 to 90 days |
| Business line of credit | Up to $5 million | Revolving, 6 to 36 months | As low as 6% APR | As fast as same day |
| Invoice factoring | Up to 100% of invoice value | Tied to when your customer pays, often 30, 60, or 90 days | 0.5% to 3% per 30 days | As fast as 24 hours |
| Merchant cash advance | Up to $5 million | No fixed term, based on monthly sales | Factor rate of 1.08 to 1.45 | As fast as same day |
| HELOC | Up to $750,000 | Up to 30 years, with a draw period up to 5 years | As low as prime, commonly 8% to 13% | As fast as one week |
Why Trucking Businesses Borrow
Here are the most common reasons trucking companies decide to borrow:
Buying trucks. Once a truck nears the end of its useful life, a new truck might cost less than fixing the old one
Expanding your fleet. You'll have to cover the cost of the truck, insurance, and the plates before you start hauling.
Hiring drivers. The median salary for a truck driver in the U.S. was $58,640 per year, according to the Bureau of Labor Statistics.
Fuel and maintenance costs. A major repair can eat away at your cash reserves, especially for a small fleet.
Covering slow freight seasons. Not every season is busy. Trucking business financing covers gaps during the slow times.
What a Trucking Business Actually Costs
There are a number of important costs to consider when managing your trucking business. Here are some of the bigger ones:
US DOT and Motor Carrier Number
$300 per operating authority
Insurance
$15,000 to $25,000 per truck
New trucks
$80,000 to $150,000
Trailers
$30,000 to $50,000
Heavy vehicle use tax
$100 to $550
Business entity fees
$50 to $800
Types of Trucking Business Loans
Each of these trucking business loans suits a different need. These are the options available through Clarify Capital's network of lenders.
Equipment Financing
You can use equipment financing to buy vehicles and other equipment to support your trucking business. The equipment secures the loan as collateral. Finance up to 100% of the equipment value, with repayment terms from 12 to 72 months. APRs start at 6%.
Short-Term Business Loans
A short-term business loan is a lump sum with fixed repayment terms. Borrow up to $5 million with APRs starting at 6%. Repayment terms run from six to 36 months. These loans fund fast. Use them when you can't wait for the bank.
SBA Loans
The U.S. Small Business Administration (SBA) partially guarantees SBA loans. These loans allow you to borrow up to $5 million with terms from 10 to 25 years. Approval can happen as quickly as two weeks but typically takes 30 to 90 days.
Business Lines of Credit
A business line of credit gives you a revolving credit limit you draw against. Pay interest only on what you use. Lines go up to $5 million on six- to 36-month revolving terms. APRs start at 6%. Business lines of credit are a working capital tool you can use to cover expenses like fuel and payroll.
Invoice Factoring
Invoice factoring, sometimes called freight factoring, turns your accounts receivable into quick cash. You receive up to 100% of the value of the invoice with fees from 0.5% to 5% per invoice per month.
Merchant Cash Advances
A merchant cash advance advances your money against future sales. Advances reach $5 million and are priced by a factor rate from 1.08 to 1.45. Merchant cash advances are some of the fastest options on this list, but they're also one of the most expensive.
Minimum Qualifications
$10,000 in monthly revenue
Your business must earn at least $10K per month in a business bank account.
500+ credit score
You can get approved with any credit score. But the better your credit rating, the better interest rates lenders offer. Your FICO score should be above 500.
Minimum six months in business
Your company should be operational for a minimum of six months. This shows business lenders that your company is sustainable and won't go out of business.
Have a business bank account
Your Clarify advisor will need three or four months of your most recent bank statements to verify income. This is just to see you're actually making $10K+ month in revenue.
What Lenders Review
This is generally what lenders review when underwriting for trucking business loans.
Personal and business credit score
A higher personal credit score helps you secure better rates and terms
Monthly revenue
Proof the business makes enough monthly revenue to take on a new payment with room to spare
Time in business
New trucking businesses may face more scrutiny from lenders compared with those who've been in business for a long time
Personal guarantee
This means you're personally responsible if the business can't pay back the loan. Most business loans require one
Collateral
The machinery secures the loan in equipment financing
Cash flow
Lenders review your bank statements, overdrafts, and available cash cushion
Bad credit doesn't automatically disqualify you. Short-term business loans and equipment financing through Clarify's network require a minimum credit score of 550. Merchant cash advances go as low as 500.
Using a HELOC To Finance Expansion
One other financing option I'll mention is a home equity line of credit (HELOC). The biggest difference between a HELOC and the other financing options on this list is that lenders underwrite HELOCs based on your personal finances, though it can be used to cover business expenses. HELOCs use equity in your home rather than the business. This means if you can't pay back the loan, you're putting your home at risk.
HELOCs are revolving credit lines that you can draw on, repay, and draw again. Lines run up to $750,000 through Clarify Capital's lender network.
Finance Your Trucking Business With Clarify Capital
Choosing financing for your trucking business isn't hard if you match the financing option to your business needs. Equipment loans fit new vehicle purchases while short-term loans fit an urgent payroll need.
When you're ready to see what fits your business, apply today with Clarify Capital, and a lending advisor will go through your options with you. Checking your options won't affect your credit score.
Trucking Business Loans FAQ
Here are the most common questions I get about trucking business loans.
Can I Get a Business Loan for a Trucking Company?
Yes. Trucking companies qualify for many types of small business loans and financing. Equipment financing and freight factoring align with how carriers operate.
What Credit Score Is Needed To Finance a Semi-Truck?
It depends on the type of financing you're looking for. Clarify Capital's network of lenders requires a minimum credit score of 550 for equipment financing. Higher scores typically unlock better repayment terms and interest rates.
How Much Is the Monthly Payment for a $100K Business Loan?
It depends on the interest rate and repayment term. At 9% APR over five years, $100,000 is about $2,076 a month. At 12% over the same five years, it's about $2,224.
What Company in Texas Is Paying Truckers $14,000 a Week?
This figure is credited to Sisu Energy, a Fort Worth company that runs frac sand hauling. The number was gross revenue for owner-operators who already owned a truck, not a driver salary.
Do I Need a Down Payment for a Trucking Business Loan?
It depends on the type of financing. Revenue-based financing, like term loans and merchant cash advances, doesn't require a down payment. Equipment financing doesn't require a down payment because the vehicle secures it.
How Does Clarify Capital Protect My Data?
Clarify follows SOC 2 security principles. Your information is used to match you with lenders in the network and isn't sold.
Michael Baynes
Co-founder, Clarify
Michael has over 15 years of experience in the business finance industry working directly with entrepreneurs. He co-founded Clarify Capital with the mission to cut through the noise in the finance industry by providing fast funding and clear answers. He holds dual degrees in Accounting and Finance from the Kelley School of Business at Indiana University. More about the Clarify team →
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