Applying for commercial truck financing when you have perfect credit and time in business is a pretty straight forward process. If your new in business or have less than perfect credit things aren’t always so easy. There are a few things you want to look out for to better your chances of getting approved and to get the best deal you can given your situation.
Supporting Documentation – Have any supporting documentation for the derogatories on your credit. For example if you had a tax lien or judgment in the past that is now satisfied submit that with the application. This avoids the rubber stamp “decline” you will get initially. It also shows the underwriter you acknowledge the issue upfront and your not trying to hide anything. If you were late on a mortgage bring in your current statement that shows that your now current. Same thing with late payments on a previous truck. Accounts that are paid off but still showing open on your credit report should be clarified. Supply statements for credit cards, installment loans, etc that are paid off. Reducing the amount of debt your are still showing open can only help you.
Hauling References – Truck lenders like to finance trucks for people that have the work lined up and ready to go once you have the truck in place. Having hauling references, contracts, etc. will show the lender the truck your financing will start to produce income as soon as you get it so supply those references or contracts with the application. If your working through a broker have the broker provide a letter of intent of some kind. This will at least show the lender you have a source of business in place. If the truck your financing is replacing one of your trucks supply the reference for the truck your replacing.
Previous Truck Financing – If you have financed a commercial truck before and had a good payment history provide that lender as a reference. Personal vehicle financing usually won’t work. And you obviously don’t want to supply a reference if you had lots of late payments. But previous commercial truck financing experience is really helpful even if you have bad credit. This applies to commercial trailers, repair financing, or any financing you have had in the past for your trucking business.
Compensating Strenghts – If you know your credit is bad offer compensating strengths to offset your weaknesses. For example if you’ve had a recent bankruptcy or repossession offer the lender a larger down payment. Acknowledging your bad credit upfront and offering additional strength is a great way of attacking the issue upfront. It also allows the dealer to better place your loan request with the lender that is most likely going to approve you. Additional collateral is another way to add strength to a deal. Have a free and clear truck title? Offer it as additional security to get around you bad credit history. This approach is becoming more and more popular with people as a way to grow their trucking business.
Cash Flow – Show cash flow. If you have a good cash flow with healthy balances at the end of each month your going to want to get that in front of any prospective lender. If they see you have two times the potential truck payment in the bank every month this gives them the confidence you will have the cash flow to make the payments. Some lenders require ACH for the monthly payment so this would show the money is in there and the payments would go through. If your income is funneled through other accounts like Comdata use those statements. As a side note, if you don’t have strong cash flow that’s not necessarily a problem, just don’t offer your bank statements. But if you do, put it out there.
Having open conversations with your potential truck lender or truck vendor will go a long way in getting the financing you need to start or grow your business. Most people have some credit issues so lenders are used to “shoring up” a transaction with additional strengths. As usual, if you have any questions you want to run by us just give us a call or visit our homepage.