Any startup or business requires an initial investment for the expenses involved. From buying the equipment to set up an office, there are a lot of finances involved, but many can not pay for those expenses right out of their pockets. The same goes for business owners in the trucking or logistics industry.
Many small trucking businesses and owner-operators require financing services to keep their initial capital investment low. This is how truck financing comes into play, as such businesses can use a loan or lease to get the business moving in the right direction.
How Does Truck Financing Work For Tow Trucks?
One of the essential vehicles used in the logistics industry is tow trucks. They are required for towing and repossession companies. The problem here is that tow trucks cost thousands of dollars. If you’re planning to buy a tow truck for starting up a business or for a running business, paying such a big amount right away is not a very wise decision even if you have the amount. The reasons for this are following:
- Spending such a huge amount right away can have a substantial impact on your cash flow.
- Like all other businesses, Trucking businesses involve risks and the business owner should have conserved working capital for unexpected expenses, which are guaranteed to happen in every business. So from financial aspects, it is better to have greater working capital.
- With truck financing, the owner can purchase the equipment without affecting his cash flow and working capital. It’s a lot easier to make small monthly payments than to spend hundreds of thousands of dollars for a fleet of trucks.
What Is The Eligibility Criteria For Financing A Tow Truck?
Every truck financing company has certain criteria to approve you for the loan. It varies from company to company but here is an insight into what makes you eligible to apply for the loan/lease:
- Your credit score should be higher than 650 (around 700). A credit score tells about your credibility and how well your business has been doing. The greater the credit score, the better you look to the lender.
- Your credit history should be clean in terms of bankruptcy and tax liens, which means, you should be a regular tax-payer.
- You should have experience in the business of at least 2 years. This varies from lender to lender but 2 years is an average criteria.
Even if you do not match these requirements, there are some lenders who lend loans at higher interest rates.
Benefits of Truck Financing
Tow Trucking businesses are not easy to start or maintain. It requires great effort to run a tow trucking business regardless of which industry you’re from. These businesses usually require a huge amounts of investment and involve greater risks. Even if you can afford to invest such a big amount, it’s way too risky. That’s where financing helps you. Here is an overview of why truck financing is beneficial:
- Steady cash flow:
Truck Financing allows you to get your desired equipment without having to pay a huge amount in one go. In this way, the cash flow of your business remains steady.
- Low-interest rates:
If you have a good credit score, you can get the loan at a very low-interest rate.
- Greater working capital:
When you have a good cash flow and the best suitable truck for your business, it will increase your working capital making your business secure and making you prepared for any kind of risk.
No matter which industry you’re from, if you have a trucking business or you plan to start one, you should consider truck financing for all the reasons mentioned above. It is the best way to speed up your growth in your competitive market and achieve in remarkably less time, which can take years.
