"Can you put together a proposal for me to borrow the 10k I need to get my truck back on the road? If my truck didn't blow I wouldn't need it. Who would have thought a dealer certified truck under warranty wouldn't last a month?"
Owning a trucking business can bring about similar situations and more:
Many smaller trucking companies cannot afford to buy brand new vehicles.
Repairs can often run $10,000 to $20,000.
The entire business might depend on having a working truck on the road.
A greater concern is if you're looking into a truck repair loan and need the money fast. Being off the road halts revenue. Being stranded a 1,000 miles from home while waiting for the truck to be repaired is an even bigger problem - the classic "Catch 22" - you not only need money for repairs (and possible for a place to stay and meals), but the only way to start generating revenue again is to get your truck fixed.
Is having a functioning vehicle the lifeblood of your business?
Need money to repair a commercial truck? Here are some options:
1. Using Working Capital Loans for Truck Repairs
There are a number of "working capital" providers that offer short term financing that can be useful when money is needed quickly: many of these providers offer same-day or 24-hour financing options.Most working capital loans are short-term and operate on a "daily payment" model. Over a period of 6 to 12 months, money will be taken out of your account Monday through Friday, excluding holidays.
Most working capital lenders will advance approximately 1 month of revenues. This could be at "factor rates" from 1.2 to 1.5. This means if $20,000 is made per month before expenses are factored, it’s possible to acquire $20,000 and you would then pay back between $24,000 and $30,000.
The biggest challenge in using a daily payment loan to finance repairs on a truck is the size of the payments: a $20,000 advance paid back over 6 months could result in daily payments grossing between $3,800 and $4,800 per month draining the liquidity your business needs.
Lastly, when calculated as an annual percentage rate, or "APR", the vast majority of these working capital loans have very high APRs - ranging from 50% on the low end all the way up to 200%.
2. Using an Equipment Leasing Company to Finance Truck Repairs
Some equipment leasing companies offer truck repair loans, using the truck being repaired as loan collateral.If you own the vehicle or other equipment to use as collateral outright, (meaning nothing is owed against it) an equipment leasing company can be a good choice.
Rates and terms will depend heavily on credit profiles, but a $20,000 loan paid off over 3 years using a leasing company might result in monthly payments from $800 to $1,500 depending on the situation.
The three challenges that come with a leasing company:
You'll usually need enough equity in your equipment to finance the repair - meaning if $20,000 is needed, the value of the equipment (less what is owed) must be at least $20,000.
A leasing company will use auction or liquidation values in order to appraise the equipment. This often means the valuation will come in around 50% or less of what you think the equipment is "worth."
With a lease, it is difficult to pay the financing off early. Many leasing companies will state that there are "no prepayment penalties", which is technically true, but the part of that statement that is often omitted is that in most leasing contracts there is no actual benefit to early payoff.
3. Finance Your Receivables With Factoring
If you are waiting on receivables (money owed to you for work already done) sometimes utilizing a factoring company can help get the money needed for repairs.Here's how it works:
Let's say you bill $25,000 per month in your business, but customers wait 60 days to pay you. That means at any given time, you would be waiting on $50,000 in invoices.
A process known as "factoring," which entails early payment on outstanding invoices in return for receiving a smaller amount once those invoices are paid- could potentially provide a portion of that money immediately - often 90% or more. This means that if you were waiting on $50k, you could potentially receive $45k and the costs could range from 3 to 5 percent monthly.
One challenge to using accounts receivable financing to facilitate a truck repair: if you don't already have a relationship with a factoring company, it can often take 1 or 2 weeks to complete the transaction. The money might need to be in hand as soon as possible.
The other issue with factoring invoices to pay for a truck repair:
That revenue may be needed for truck payments, gas, or living expenses, plus factoring entails issuing a UCC filing, which will show up as a lien and make future financing harder to achieve. This type of loan also carries a high rate if computed as an APR, with smaller (under $100k) contracts having rates equivalent to 60% or more. Lastly, whenever taking out financing, most business owners prefer to be building your business credit, which does not happen under these sorts of contracts.
4. Small Business Term Loans
It’s possible that a small business term loan, such as one offered by Zion Finance - Lend Up is the best fit for your situation.If you have been in business for at least 2 months and have a credit score above 500, you could borrow up to 2 times your monthly revenue. For example, a business earning $10,000 monthly before expenses would allow one to borrow up to $20,000. The loan could then be repaid over a period of up to ten years with no prepayment penalties.
Payment arrangements vary and depend on credit profiles. Getting a $10,000 loan for truck repairs through Zion Finance - Lend Up could result in minimum payments from $220.48 per month over ten years -- if you have excellent credit, to $1,321.29 over 2 years for the worst credit profiles. Funds can be deposited into your account in as soon as the same day you apply.
As opposed to most of the other options we have discussed in the article, loans offered by Zion Finance - Lend Up are reported to business and personal credit bureaus, offering the ability to build credit.
Lastly, when comparing payments between your different options, don't forget to compare on an after-tax basis. Many small business funding options are not tax deductible, but interest on Zion Finance - Lend Up’s small business loans may be tax deductible. Contact us now for more information's.
Do you need a quick loan today? Zion Finance - Lend Up can help you with the loan you need, we offer personal loans and loans for business development. To apply e-mail: zionloanfirm.ltd@aol.com
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