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Your Full Guide to SBA 7(a) Trucking Loans

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Even amid a global pandemic, the trucking and transport industry is thriving. If you’re an owner-operator or the CEO of a trucking company, now is the time to grow your business.

There’s an endless demand for what you supply and nothing standing in your way of expanding — except, possibly, the funds to do so. However, you can easily overcome this challenge with an SBA 7(a) loan.

These loans are for everyone from a one-truck business to the owners of a fleet of semi-trailers. If you need to repair your current vehicles and get them operable, recover after an accident, or purchase new equipment to expand, this loan is for you.

So what exactly is an SBA 7(a) trucking loan, and how can you get one?

We’ll take you through all the ins and outs of finding and applying for this source of funding in this guide.

1. What Does an SBA 7(a) Trucking Loan Cover?

Trucking companies generate a massive economic impact. Over 500,000 businesses keep nearly four million individuals employed.

The federal government has established various departments to monitor, oversee, and assist all of these entities. Each branch focuses on specific regulations and guidelines. The U.S. Small Business Administration (SBA) is the go-to bureau for small and medium business owners.

The SBA recognizes the importance of your company, and they want to help you be successful. So, they created a special loan that trucking and transport companies can use to get the working capital they need to stay afloat.

What You Can Use an SBA 7(a) Loan for

SBA trucking loan terms don’t specifically tell you what you can and can’t use the funds for when you get them. The only “catch” is that you must use the loan for business purposes, not things like personal expenses or vacations.

The business financing offered here is approved for purchases such as:

  • Real estate
  • Working capital (short- and long-term)
  • Renovations and redesign of business interior and exterior
  • Furniture
  • Supplies
  • Fixtures

Small business owners with all kinds of needs approach the SBA every day. Your loan request is nothing they haven’t seen before, although your business’s details may be unique.

As long as the maximum loan amount you’re seeking is $5 million or less, you’re in the right place. However, when dealing with the SBA, you’ll have some hurdles to jump through in the application process. It is the government, after all.

Easy enough stipulations, right?

So, if that sounds like something you can handle, the next step is to see if your trucking business is eligible.

Related: What You Need to Know About Trucking Business Loans

2. Are You Eligible for an SBA 7(a)?

If you operate a for-profit small business (as defined by the SBA), chances are you’re eligible for this type of loan.

The SBA’s working definition of a small business is any enterprise that is independently owned and operated and not dominant in its industry in the nation.

It must be located in the United States and meet the industry-size standards for the number of employees or annual receipts it has.

To see if your business meets the size standards, check over this handy guide that breaks it down for you. For example, truckers in the category of 484110 General Freight Trucking, Local net a standard of $30 million annually. There is no defined employee size.

Other Eligibility Requirements

If you meet the SBA’s definition of a small business so far, here are a few more requirements for this specific loan.

You must:

  • Be doing business in the U.S. and/or its possessions
  • Have invested equity into the company already
  • Show documentation that you’ve other resources before applying for the SBA7 (a) loan
  • Not be delinquent on anything you owe the government

In short, you’ve already opened a business in the U.S., you need to increase your cash flow, and you’re not in default with the IRS.

Of course, as with any loan, even if you meet the eligibility requirements, terms and conditions apply before you gain full approval.

Essential Eligibility Factors

The SBA isn’t going to look at where your cash flow is going until it has examined your creditworthiness first.

Eligibility depends on some key factors, such as your credit score and history and your overall business strength.

The SBA providers are reputable, and the repayment terms are some of the best in the lending industry. It makes sense that they’re going to want to see that you are in a position to pay them back once you have a little help.

The SBA will likely require a down payment of some sort as a good faith effort. Lenders see this as your financial investment into your business’s success.

However, it’s worth contacting the department if you don’t meet all these requirements or a catastrophe keeps you from having a down payment. There are special considerations, and you could fall into the fine print of that category.

Remember, as a truck driver and owner, you provide an essential service, especially since the coronavirus pandemic. The government will want your business to flourish.

You may also like: Business Credit Reports: How Your Experian, Equifax, and D&B Scores Are Used

3. How to Apply for This Loan

Man using laptop to apply for trucking loan

Applying for a government loan involves lots of paperwork and red tape. But it makes it easier when you know what to expect and can prepare ahead of time.

An SBA 7(a) loan is a general-purpose loan with a cap of $5 million. The repayment terms can range, but the 10-year length with set monthly payments is the most common.

The Business Plan

The most time-consuming part of the application process may be putting your business plan together.

When you’re dealing with an SBA lender, they’re going to expect to see that you have a game plan for their funds. This is all included in your business plan, a document that works as a roadmap for you to follow.

It’s a bit of extra work upfront, but ultimately, a business plan is a game-changer. It forces you to confront obstacles before they occur and develop action steps to overcome them.

Throughout the plan’s creation, you look at everything from the structure of your company to marketing and sales. You’ll include a list of where you have money earmarked, especially for large equipment purchases like commercial trucks.

The SBA doesn’t expect you to know how to do this naturally. They provide you with access to free counselors and other resources to put together your business plan.

A Checklist to Help You Prepare

The United States government has the stereotype of being paperwork-centric. In the case of applying for this type of financing, “paper-centric” works in your favor.

The SBA has already thought of everything your business needs for the process and put it together for you to access. After your plan is complete, use the provided checklist to gather the rest of the documentation.

You’ll need, at a minimum, the following:

  • The completed application form
  • A statement of personal history (including your authorization to pull your personal credit score and a financial statement)
  • Business financial statements and your recent bank account statements
  • A list of all names and addresses of any subsidiaries and affiliates in which you have a controlling interest
  • The original business license that has your corporate seal on it
  • Proof of application for other loans in the past
  • Three most recent years of income tax returns — personal and business

They may expect you to offer a personal guarantee of some kind. This can be your existing business assets, like trucks in your current fleet, or a cash down payment.

With all of this put together, your application is complete, and now the waiting begins.

Discover: Simple Small Business Solutions You Actually Need

4. What to Expect During the Process

It’s hard to predict how your individual loan application and approval process will go. Everyone is different, and much of it depends on whether you provided everything the SBA agent needs to move you to the next level.

Your loan application will go through the reviewing agent before going to the underwriter. That person or group will decide if it’s approved or not before sending it to the next stage.

At each point, minute variables could cause a delay in your application as they request more information from you.

However, if you include everything in the first application, this is how the typical loan process looks:

Step One

Borrower gathers the documentation in the checklist above, which can take up to 30 days.

Step Two

In the underwriting process, the agent reviews your application for completion and evaluates your credit history and business plan, taking 10-14 days on average.

Step Three

The approval or denial is determined, and a commitment or denial letter is sent, with the norm length to wait at this stage being 10-21 days.

Step Four

You accept the approval and terms, and the loan closing is scheduled and typically completed within 7 to 14 days.

If you’re not comfortable with the repayment terms or change your mind at any point in the process, you can cancel the application.

Related: Are Grants Always Better than Loans?

5. What to Do if You Need Money Fast

Alarm clock with coins stacked next to it

If you’re not in a hurry, the SBA 7(a) is one of your smartest loan options. The lower interest rates and solid terms mean you’re not paying a fortune in fees.

The stringent requirements make it difficult for a startup, and if you need working capital in a hurry, the long process cancels out this specific loan.

Don’t give up yet, though. Other trucking business loans options will work better for you.

Examples of Truck Financing for Startups or Quick Approval

Maybe you’re trying to refinance an existing loan (which the SBA doesn’t allow except in certain circumstances), or you need working capital for an urgent investment.

The traditional bank loan route doesn’t work for everyone. But the trucking industry is full of other alternative lending solutions.

Invoice Factoring

A dominant percentage of trucking companies use invoicing. If you’re already in business, but you’re waiting on clients to pay their bills, invoice factoring could be your solution.

When you use an innovative fintech company like Now, invoice factoring is simplified. Now’s unique invoice acceleration program, NowAccount, turns your accounts receivables into cash seamlessly.

You choose which invoices you want to redeem and upload them into the NowAccount portal. If the company agrees to buy the invoice, they pay you the value you’re owed minus a flat service fee.

You get the cash you need quickly without any loans to repay, and the invoice factoring company makes a profit.

Business Line of Credit

Instead of using a credit card with high rates, annual fees, and no definite payoff date, a line of credit is a better option.

This financing alternative works almost exactly like a credit card. You’ll get a credit limit, and you can use it however and whenever you need funds.

Monthly payments are based on the amount you borrow, and when you pay off an amount, you can use it again until the term ends. At the ending date, the amount borrowed is repaid in installments the same as you would complete a loan.

Short-Term Loan

Borrowing funds for a short-term problem shouldn’t be a long-term repayment issue. If you only need a little bit of capital for an immediate fix, a short-term loan can help.

Business owners can apply for these loans easily through online lenders. While many legitimate investors are ready to help you, be cautious about the payment terms.

Check around for the best rates and verify the lender’s reputability with the Better Business Bureau and a detailed Google search.

Equipment Financing

This type of funding is generally easy to get approved for if your business isn’t in dire financial straits. As an equipment loan, you can only use the money to buy the trucks and other essential machinery you need.

The equipment backs up these small business loans as collateral, so the lenders are more lenient on which businesses they approve.

See also: 5 Things to Know About Small Business Loans

Conclusion

Your business can impact the economic industry on a global scale. An SBA loan program could be all you need to make a difference (and a profit).

Finding an SBA 7(a) trucking loan and applying for one will take some time, but it’s designed to help your business succeed.

And if you realize that it’s not the right solution for your needs, Now is the fintech company to check out for alternative financing options.

Contact Now to start increasing your cash flow today!