Semi-trucks transport a big chunk of goods worldwide. As a matter of fact, Canada’s trucking industry in 2018 generated 39.55 billion Canadian dollars from 63.7 million shipments. The industry also employs over 312,000 truck drivers, and it’s a significant industry for the country’s economy where all these owners-operators need access to crucial lending to grow their businesses.
Semi truck financing is borrowing money with a truck’s help, which will serve as collateral to acquire funds. Getting such a loan is entirely different from financing a car for personal use. You will need to put down money up front and have an excellent credit rating. Most creditors will ask to see how you did business in the last two years and expect to know that you could generate steady revenue during that time.
Various options for semi-truck financing are available on the market, beginning from equipment financing and leasing up to credit without guarantee. You can get semi-truck financing from alternative lenders, equipment leasing enterprises as well as old-fashioned banks.
It is essential that you find the best offer for your business, depending on the condition, cost, and if you are planning to buy a new or used semi-truck. If you have a good and fruitful relationship with your bank partner, it can be the right option.
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But for those who don’t, alternative lenders work with more comfortable credit criteria since they borrow on a greater variety of equipment with different conditions.
Here’s everything that you should know about getting approved for semi-truck financing in Canada.
The Application Process
There are five crucial steps to follow when you feel prepared to start the process of semi truck financing. It is necessary to go through every step carefully and thoroughly to maximize your chances of being approved and getting the best possible terms and tariffs.
1. Make Sure Your Are Eligible For A Loan
There’s little use in applying for any loans if you don’t qualify. The essential qualifications are mostly the same for a majority of the financing options. Most importantly, if you link up a good truck value and a sizable down payment, providers will feel reasonably comfortable to approve your loan application. It leaves little risk in the equation for them. So make sure you meet the following criteria:
- a down payment of 5% or more (upcoming owner-operators may need 10% to 20%);
- a truck that’s less than ten years old and has fewer than 700,000 miles of mileage;
- at least five years with a CDL license;
- a credit score of 600 or higher (660 would definitely score you a loan).
If you meet these conditions, in all likelihood, you will get a loan approved. However, the precise criteria are different from one lender to another.
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It’s vital to the loan provider that you have at least five years with a CDL license because they can be sure that a skilled driver will operate the truck.
The truck being the collateral needs to be as safe as possible, so being a beginner driver, it would not go well with the application. So, if you checked all of the above, you’re good to go to the next step.
2. Collect The Necessary Documentation
When you’ve established that you are eligible for financing, the next thing you do is collect all the necessary information required by your creditor. In any application, getting all the needed documents in good time is very important and will make the procedure faster and smoother.
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Being ready and confident with your documentation gives the lender the impression that you are a serious buyer and might give you an edge in today’s market. The necessary documents are as follows:
- Bank statements up to 12 months back;
- Your business’s profit and loss in the current year;
- Current business balance sheet;
- Proof of your registered business;
- Any required certifications or business licenses for your company;
- Motor carrier number;
- NSC number and registration number/certificate depending on your province.
Getting this documentation in place is not too complicated. When you’ve assessed that the documentation is ready, you are now prepared to choose the perfect semi-truck for you.
3. Select The Truck That Suits Your Needs
It is much more challenging to find the truck that’s the best suited for you when you’re financing instead of buying with cash. It would be best to make sure the semi-truck will be capable of hauling the commodities particular to your business operation.
Also, it has to be a reasonably young machine. A truck that is too old or driven extensively will most certainly ruin your chances to get a loan approved. Make sure it is less than ten years old, has less than 700,000 miles on it, and is preferentially sold by a dealer.
When you finally picked out a truck and negotiated a price, get a written quote that should contain the mileage, pictures of the vehicle, model, make and year, specification of condition (new or used), condition report, and truck serial number. Act swiftly because cash buyers always have an advantage and can get the truck right out of your nose.
4. Pick Out The Best Insurance
The financing company can’t take the liability to cover eventual truck accidents by itself, so you need proper insurance for your semi-truck. An acceptable insurance policy will go a long way with your lender.
Depending on your business, there are different insurance models. But if the vehicle is the company’s only asset, you will require primary liability coverage, physical damage coverage, cargo coverage, and bobtail coverage for non-trucking.
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The costs of an acceptable insurance policy vary, increasing with the size of the company. The best thing to do here is to consult with an insurance broker, which will make things a lot easier for you.
5. Deliver The Whole Documentation To The Lender
If you’ve successfully covered the previous four steps, it is time to finally submit your application. Do a couple of final checks because you can never be too sure in delicate procedures like this. It is not the end of the world if you miss something relatively trivial because most companies are flexible with receiving additional documentation.
It is essential to go carefully through these steps so that you submit a quality application for your semi-truck financing, whether being a loan or a lease. Being careful with the process and taking care of the details in the application will help you comprehend it better and get better financing.