If you are an owner operator and want to purchase a used semi so you can continue growing your business, then you may need to acquire some semi truck financing. This may be extremely important if you do not have the cash to buy a used semi yourself. However, it may be difficult to get the financing you need if you do not have good credit. If you have bad credit, then there are a few things you should do that may help you to get the financing you need.
Get The Down Payment
It is always a good idea to secure a down payment when purchasing a commercial vehicle. This is especially true if you do not have good credit to rely upon. For large purchases, down payments are typically about 20% of the purchase price. You may know this if you have purchased a home recently. In some cases, 10% may be acceptable, but this is usually only the case if you have good or excellent credit.
If you have poor credit, then you should try to gather around 30% of the purchase price as a down payment. This may be a bit difficult. However, if you locate a used semi in the lower range of the scale, then you can expect it to cost between $30,000 and $40,000. This means that you will need at least about $9,000 before you are able to finance a truck.
You generally will not need collateral if you are able to secure a larger down payment. The truck itself will be the collateral that you are using to secure the purchase. In other words, the truck will be repossessed if you cannot make the appropriate loan payments. If you cannot secure a full down payment though, then it may be wise to offer another form of collateral in addition to the truck. This can help to reduce the risk of the loan in the eyes of the financing company.
Get Your Paperwork In Order
Semi and commercial financing companies will not simply offer loans to individuals who are able to secure a down payment. They will give money to individuals who have a solid commercial business. If you have already established an LLC, then business records can usually be found through a computer database. If you have been acting as a sole proprietor for at least one year, then your previous tax records will be needed. If you are a new business, then you can offer proof in the way of your registered DBA name or your employer identification number.
Along with proof of business, you will need to verify that you are legally able to operate a commercial vehicle. A current CDL or a USDOT number may need to be provided. The finance company should be able to provide you with a comprehensive list of the paperwork that you need. The more proof of a solid business, the better your chances of being accepted for a loan.
For more information, talk to a professional like Arrow Truck Sales.