HOW TO CHOOSE THE RIGHT TOW TRUCK FINANCING OPTION
There are several ways to finance a tow truck, including equipment financing, bank loans, and leasing. These options give you the flexibility to choose the one that best suits your business needs.
The great news? There’s always an option available for you. In this article, we’ll walk you through everything you need to know about tow truck financing and how to select the best option to increase your chances of approval.
WHY YOU SHOULD FINANCE A TOW TRUCK
Recent market trends show that the price range for a new tow truck varies from $90k to over $150k based on the model and manufacturer you choose to go with. Unless you’ve got that hefty sum tucked away safe, it might be wise to look into financing options. The bright side is that there are many financing alternatives out there.
Deciding to finance a tow truck instead of buying it with cash upfront is beneficial due to the tax benefits that come with it along the way! Through financing, purchase expenses can be deducted from your income resulting in tax savings for your business operations!
For instance, If your business generates a revenue below $10 million and you invest in a truck valued at $20k, there’s a possibility to deduct the entire cost of the vehicle in that same fiscal year.
Similarly, choosing a lease agreement could allow you to deduct the full lease payment as a tax write-off, whereas with a purchase option, you wouldn’t qualify for these deductions
TYPES OF TOW TRUCK FINANCING
Every trucking company is different, which is why there isn’t a universal financing solution. There are factors to take into account when exploring financing options.
Achieving the best financing strategy entails understanding your company’s circumstances and selecting an option that aligns better with your business considering cash flow capacity, size of the operation, and budget constraints.
Let’s take a look at some of these types of tow truck financing so that you can make informed decisions.
TRADITIONAL BUSINESS LOANS
If you walk up to a bank to ask for a loan to finance your tow truck, there is a high chance you walk out with the amount you need provided you meet their terms and conditions. This is called a traditional business loan.
These are loans you take from banks or credit unions to finance any aspect of your business, including purchasing a vehicle. For this type, you would need an ideal credit score, a down payment, and collateral, which in this case will be the tow truck.
EQUIPMENT FINANCING
Just like a mortgage helps you purchase a house, equipment financing helps you purchase any equipment for your business. This means this type of loan cannot be used for any other thing.
Qualifications for equipment point directly to your ability to pay back, which is why it is more common for lenders to give 80% of the equipment value, while 20% serves as a down payment. Similar to the traditional loan alternative, the truck serves as collateral.
Length for repayment can range from between months to years, and the interest rates depend on agreed-upon terms.
LEASING
When you opt for equipment financing, you get to own the truck when your debt is paid, but that is not the case for leasing. Of all tow truck financing, leasing seems to be the less expensive option because it requires no down payment or high interest rates. However, you cannot own the truck at the end of the lease term.
So why opt for leasing at all?
Leasing is an attractive option for businesses who are looking at upgrading their trucks to newer models. What this means is that you can lease new or better truck models as you see fit. Regardless you can go for lease-to-own agreements, which allows you to purchase the truck after leasing is complete, but this comes with its conditions.
BUSINESS LINE OF CREDIT
A business line of credit is a credit system that allows you to access funds on an as-needed basis. It works best for short-term loans and can be used to pay for your down payments and other expenses like repairs.
ALTERNATIVE FINANCING OPTIONS
If credit score and business history are a concern for you, then you should consider alternative financiers. These are lenders that provide tow truck financing with bad credit. Best of all? You can find them online.
Because they provide tailored financing solutions, you can expect flexible funding solutions such as quicker approvals and more adaptable terms, compared to banks. If you are new to the business without a credit score and business history, this is the option you can look out for and explore.
QUALIFICATION FOR TOW TRUCK FINANCING
While we have already covered some of these, let’s have a checklist of the basic things a bank or lender will look out for before giving you a tow truck loan:
- A FICO score of 650 and above
- At least three in business
- A minimum of 20% down payment
- No recent bankruptcies
- High credit balance, etc
HOW TO APPLY FOR TOW TRUCK FINANCING
RESEARCH THE FINANCING OPTIONS
Now that you know that there are different financing options available, the first step is knowing the right one for your business. Evaluate your business needs and financial strength to know the best option.
APPLY FOR FUNDING
Once you have found the perfect choice for your business, begin the application process. Gather vital documents like
- Business balance sheet
- Business and personal tax returns
- Bank statement
- A copy of CDL
- Vehicle documents
Having all documents ready will make you prepared and make the application process easy. The application process will include stages like prequalification where the lender reviews essentials like credit score, revenue, and business history. Here, you get an idea of the loan amount and terms you may qualify for.
GET FUNDED
After going through the pre-qualification process, you and the lender will discuss essentials like loan terms like down payments, repayment length, interest rates, and more. Once this is done and finalized, you can get approved and get funded.
CONCLUSION
Finding the right tow truck for your business is easier than you think. With the right financing plan and a clear understanding of your needs, you’ll be ready to hit the road and drive toward success in no time.
ABOUT INSPIRED FUNDING
Inspired Funding has helped hundreds of truck companies secure the trucks they need to succeed. Whether you’re expanding your fleet, starting a new business, or navigating bad credit, we’re here to make truck financing simple and stress-free.
We specialize in truck financing designed to get your business on the road to success. From box trucks and dump trucks to cargo vans, semi-trucks, and other vocational vehicles, our process is easy. Get guaranteed low payment on used and no hard pulls on credit scores.
With competitive interest rates, flexible down payments, and manageable repayment plans, you can focus on growing your business without the stress. Start your journey to funding today!
