transportation loan

3 Different Types of Loans for Your Transportation Business

Ezra Cabrera | February 26, 2019


    Owning a transportation business is costly. Business owners are often faced with unexpected expenses. Things like truck repairs and maintenance, blown tires, driver over time due to traffic or unforeseen delivery delays, parking, and toll fees all come due to the nature of the business. While you can’t predict when these types of things will occur, you can and should keep one step ahead by applying for a transportation loan.

    With cash on hand, you can plan for these challenges and make sure that you maintain a healthy, topped up cash flow. A business loan is a viable solution to obtaining cash for such instances without having to deplete your working capital. With the transportation industry becoming more and more competitive with each passing day, entrepreneurs have to make sure they stay on top of the game. For that, they need cash.

    Here are three of the most common types of transportation loans for your business:

    1. Transportation Business Line of Credit

    A transportation business line of credit works like a credit card. This means you can repay the credit and use it again without having to reapply. There are many ways business owners use a line of credit. You can use it to fund your business growth, pay for daily business expenses, or bridge cash flow gaps. With a line of credit, you can get access to cash any time the need arises. The best part is you only have to pay for the money you’ve withdrawn from your line, plus the interest on the amount you borrowed.

    You can apply for a business line of credit through online lenders or banks. But keep in mind it’s harder to qualify for a traditional bank loan. Banks usually ask more documents to prove your credibility. For this reason, many banks deny loans to risky and/or unfamiliar industries. Moreover, it usually takes banks two to four weeks before they can fund your business.

    You can also choose whether you want to secure it or not. But it goes without saying that when you apply for a secured line of credit, you’ll receive better loan terms and lower interest rates. The opposite applies to unsecured business lines of credit.

    2. Equipment Financing

    If you’re planning to purchase or rent trucks or trailers, equipment financing is your best bet. This is especially true for new transportation business owners. Equipment financing is a long-term financing option with low-interest rates, which makes it ideal for expensive purchases like trucks or trailers.

    The good news is, business owners, don’t have to pledge any business or personal assets to qualify. The equipment purchased serves as collateral for the loan, itself. This acts as an incentive for lenders who in turn offer lower interest rates. However, you will have to provide a small down payment to qualify for this funding.

    Related: How Equipment Financing Helps Small Business Owners

    3. SBA Loans

    The Small Business Administration (SBA) created SBA loans to help small business owners secure funding. Since the SBA guarantees your funds up to a maximum of 85% of the loan. This is an incentive for lenders to offer financing to start-up companies and other small businesses. Among other types of traditional loans, SBA loans come with some of the longest repayment terms as well as some of the lowest interest rates available anywhere. You can borrow up to a maximum of $5,000,000 and repay it within ten to 25 years.

    Business owners often use SBA loans to make large purchases, such as property or other businesses. This kind of funding can also be a good fit for transportation businesses looking to expand their fleet of vehicles, buy an existing business, or open another branch.

    Many transportation companies do well with SBA loans mainly because of its longer repayment period. Other than that, it also provides a permanent source for working capital for these types of businesses.

    Apply for a Transportation Loan for Your Business

    Both start-ups and established transportation companies benefit from a transportation loan. Businesses need cash reserves to fund unexpected expenses, bridge cash flow gaps and make payroll. Essentially, the need for transportation businesses can be endless. This is exactly the reason why you need transportation loans for your transportation company.

    Related: 4 Reasons Why Your Business Needs Fast Business Loans

    With cash, you can sustain the expensive needs of your business. While financing out of pocket is an option, it isn’t the most practical way to go. Whether you’re expanding your fleet or refinancing your working capital, you can trust these loans to give you the money you need. If success is what you’re aiming for, you’d need enough funding to make things happen for your company.

    About the Author

    Ezra Neiel Cabrera has a bachelor’s degree in Business Administration with a major in Entrepreneurial Marketing. Over the last 3 years, she has been writing business-centric articles to help small business owners grow and expand. Ezra mainly writes for SMB Compass, but you can find some of her work in All Business, Small Biz Daily, LaunchHouse, Marketing2Business, and Clutch, among others. When she’s not writing, you’ll find her in bed eating cookies and binge-watching Netflix.