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Owning a trucking or freight business, dependable trucks are just the top priority. However, it is quite a costly affair to get newer trucks, which usually cost from $70,000 to $200,000 and sometimes even more. It becomes much easier to take this move with the help of a truck business loan, which converts those huge expenses into handy payments.
You can increase the number of your trucks or get better vehicles without taking out all your money with the help of a business truck loan. Nevertheless, a business loan for upgrading trucks is also associated with certain advantages and disadvantages, which the users should be aware of.
Why a Truck Business Loan Can Be a Smart Move
A business truck loan is usually the best solution when you wish to upgrade your truck. But why limit it only to wheels when you can get more benefits from it? The following are some benefits that you will gain by just taking a loan.
1. Access to Newer Trucks
The typical way of upgrading your old truck is by selling it, and the money from the sale is then used to buy a new one. However, through the business truck loan, you can buy the new model easily. Additionally, it saves your money too, as the average mileage and maintenance costs will be lower compared to the old one.
2. Keeps Cash Flow Steady
The money you get through a truck business loan can help in paying for other expenses, thus making the business flow steadily and smoothly. You will also have some money available for contingencies and other needs such as fuel, insurance, or emergency repairs, if you decide on this financing option.
3. Builds Business Credit
On-time payment of a first-time small business loan not only keeps your truck away from repossession, but it also improves your business credit. This opens the door for better future loan possibilities with more advantages, whether you need new trucks, equipment, or even expansion funding.
4. Tax Perks
An installment of the business loan for truck, along with the interest attached to it, becomes a package that is deductible from the total tax amount to be paid back to the government. Hence, when the time for paying taxes comes, you can actually get back part of the money that you borrowed.
5. Easier Fleet Growth
Suppose your goal is to increase your enterprise. In that case, with the truck business loan, it is possible to add more vehicles to your fleet at a quicker rate. In this manner, you have the opportunity to accept larger contracts or provide services to a greater number of clients without having to wait for a long time to accumulate enough money.
The Flip Side: Drawbacks to Consider
If there are pros, there certainly are cons too. A business loan for truck has some disadvantages. Knowing the potential hazards that may occur before deciding is very important.
1. Debt Commitment
A loan can provide you with a certain amount of flexibility at the beginning, but it also means that you will be obligated to make payments on a regular basis. In case the business takes a downturn, these payments may seem very burdensome to you.
2. Interest Costs Add Up
Getting a truck business loan doesn’t come at no cost; you have to pay interest over the duration. The interest may become a considerable portion of the total vehicle price, depending on your credit rating and the term of the loan.
3. Truck Depreciation
High-value trucks experience rapid depreciation, especially in the first few years. There might be a moment when you are in a situation where your vehicle is worth less than the loan you took out on it, and you want to sell or trade it.
4. Strict Approval Process
Lenders typically request excellent credit, verification of a regular income, business reports, and, in certain cases, a substantial down payment. If you are unfamiliar with the business or your credit score is not that great, then getting approval will be difficult.
5. Risk of Repossession
It means that if you don’t make an installment payment on time, the bank can take possession of your truck since it is the collateral. And your business will be halted if you do not have the truck to continue with it.
Conclusion
Upgrading your trucks is a significant decision, yet it’s still essential if you intend to keep your edge in the market. A truck business loan provides you with the liberty to have a better truck without using your operating capital. However, it also entails some obligations. By evaluating the advantages, such as the availability of better trucks and tax deductions, against the disadvantages, such as debt and interest rates, you can decide which option is more suitable for your business. A business loan for truck renovations, when properly employed, is certainly not just about replacing old trucks with new ones; rather, it is about the company’s future expansion and stability.
