Are you thinking of moving from being employed as a truck driver to becoming an owner-operator to take charge of your destiny? Being in charge of your business is an attractive proposition for many truck drivers, but it also comes with a new set of responsibilities.
Managing your credit profile is one such responsibility that affects your financing. Approximately 45% of entrepreneurs are unaware that they have a credit score and consistently fail to secure a truck loan because of not measuring up when it comes to the credit score needed to buy semi trucks.
Here are some things you need to know before you reach out to financiers for money to purchase your truck fleet.
1. Provide Proof of Your Business
Any lender you approach for a truck loan will want to confirm that your business exists. Furthermore, they will also want to verify that all the particulars related to your firm also checkout. The supporting evidence you will provide to prove the validity of your business will vary depending on the kind of structure your firm employs.
If your business is an LLC or corporation, then you should have an easy time providing proof of your entity. All the financier will need to do is check your firm on your state’s Secretary of State website for its official record.
For partnerships or sole proprietor businesses, you will need to have filed your taxes on the firm’s income for at least one year to qualify. Eligible businesses in this category can submit their Schedule K-1 (for partnerships) and Schedule C (for sole proprietorships) proving that you are a valid business.
But what if you are a new partnership or sole proprietorship? Can you access supporting proof of your business? It is possible to get the evidence by using your Employer Identification Number (EIN). If you don’t have one, you can also use a Doing Business As (DBA) Name.
You can file for an EIN online via the Internal Revenue Service’s (IRS) website, and if you opt for a digital letter of confirmation, instantly use it as proof.
2. Down Payment
One of the stipulations for owner operator truck financing is you providing a down payment. A particular obstacle for many applicants is the credit score needed to buy semi trucks, which can influence the kind of down payment you need.
If your credit score is good, then you are likely to get 100% financing from your lender. But for entrepreneurs with a less than stellar rating, the level of down payment necessary can lead to all kinds of potential issues. A down payment for a loan for semi trucks will typically vary between 10% to 30%. Keep in mind that your down payment should not be excessively high such that it impedes your operational cash flow.
Aside from the credit score needed to buy semi trucks, other factors that determine your down payment will include the age and condition of the truck.
3. Cash Reserves
When you are sourcing truck financing, and the credit score needed to buy semi truck is an impediment for you, financiers need to feel good about your odds of success. One way you can diminish any fears about not servicing the loan would be to have cash reserves on hand. These reserves will help you cover insurance premiums, your living expenses, repairs, and routine maintenance costs during a slow stretch.
Financiers tend to be more amenable to potential clients looking for truck loans but keep eyes on buyers with a low credit score needed to buy semi trucks so they can prove their resilience. If lenders can see that you won’t be stretched thin by any unexpected situations, your chances of securing the credit will certainly increase.
Don’t Let Poor Credit Score Keep Your Business Down
Many truck drivers dream of becoming owner-operators due to the freedom and higher revenue it can bring. However, potential owner-operators need to realize there is more to managing a business such as being aware of and keeping an eye on their credit score. Make sure you’re always working on improving your financial standing and credit score.
You can get financing for a truck even with poor credit, but you need to identify the turnkey factors necessary for a successful application. Contact Conejo Credit right away to learn more!