SBA Loans to start a trucking company

looking forward to the outcome

 

What happened with this

 

There wasn't a chance in ---- of it happening.

 

For others watching this thread, I have some experience with SBA loans from both sides (lending and borrowing). Banks follow the same credit criteria to approve an SBA loan that they would follow to approve a conventional loan. This surprised me because if an SBA loan is approved and meets the government's criteria, it is 90% guaranteed by the government. Still, the bank looks at it the same way.

Without collateral going in, there is no way it is going to happen.

And, as others have said here, borrowing 100% of your startup capital, even if it were possible, is a very, very bad idea with only 1 outcome; failure.

 

I am also a veteran trying to break into this industry. I started my company 3 years ago, and I sincerely hope you listen to these guys and gals telling you NOT to try this without serious capital. I did, and believe me, it wont work. Last year, I contracted with a good company, and after 2 years of financial disaster, I am finally in the black, but still a far cry from getting my money back, much less making some. I am at a point now, where more trucks will equal more money, but I am not making enough money with the one truck I have to bootstrap my business into success. I have had almost a year of positive financials with a truck for collateral and a 729 credit score, and I still got turned down for a SBA loan through Celtic. I am actively researching alternate lending options, but its not looking too promising. Please feel free to PM me with advice.

 

It is a very bad idea to start any business without capital. Even if a lender would take a chance with someone that has nothing on the line, it is a bad idea. One breakdown and you could be out of business. If you need a tire on the road and don't have a national account, you could easily have to pay $500 or more, just for the tire. Road service is extra and they don't bill. They put on the tire you give them money or a credit card. If you get lucky, you might find a tire at Love's for less then $300. If you need a tow, you could easily spend $500-1,000. Again, they don't bill and you pay or they keep the truck. I started out with no debt. I saved my money until I had enough to pay cash for my first truck and trailer. I would highly recommend that for anyone starting out. But, I know most won't wait that long and will want to buy something now.

It can be difficult to get your first truck financed. There are several ways in which you may be able to go. I would not consider SBA as an option. I have spoken to only one individual who said he was able to get an SBA for a truck loan. Many years ago, I looked at SBA and decided against going that route. At one time, SBA didn't make truck loans due to other financing being available. Not every lender will make class 8 loans. Most consider them high risk and for good reason. The first and best place to start is with your own bank or credit union. A personal relationship can go along way to getting a non conventional loan, such as for a truck. Credit union rates will usually be lower and most have simple interest, which saves you money. There are leasing companies that make equipment loans. You will need a down payment and you will own the truck at the end of the lease. The advantage to this type of financing is that you can write the entire lease payment off rather than using depreciation. If you buy from a dealer, they usually have sources for financing. Most lenders will require about from 10-20% down. Lenders look not only at your credit but experience when making these type of loans unless you have an established corporation.

I would caution you about buying more trucks before you are ready. If you are not making enough money with one truck, you don't need to buy more until you can find out why you are not making enough with the single truck. With additional trucks come a lot of added expenses, such as driver pay, etc., Get the bugs worked out with the single truck and your debt down or paid off before thinking about buying additional trucks. Before buying additional trucks make sure you have a significant saving set aside. Trust me, you will most likely need it. I have owned trucks for many years and dealt with drivers for some time. It doesn't take but one major breakdown to clean out your savings. You need to have a good credit line or cash. Cash is preferable. Some people get into trouble because they start to buy more trucks and expand their business before they are ready.

 

I have about $10,000 saved up so far, but I know I will need a lot more. I heard someone say the magic number to have saved is somewhere between $30k to $40k, for a maintenance fund. My question is, can I get some kind of small business loan, say $70k, to cover all other start-up costs, such as buying equipment, paying for licensing, insurance, etc, and still have enough left to pad the maintenance fund? I'm not a college graduate, but it seems like a small business loan would be a lower interest rate than a truck loan. I don't have good credit, but I have an uncle with a small business that has offered to be a guarantor, should I need one.

 

Whoops. Just noticed the age of this post. My bad.