Denied - 5 Reasons Banks Don’t Approve Small Business Loans for Trucking Companies
Trucking companies of various sizes from owner-operators to those with several trucks regularly struggle to be approved for small business loans.

Here are five reasons why banks often reject small business loans for trucking companies. 

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Credit Score
Since your credit score gives lenders a glimpse at how likely you are to repay them, it is a significant factor in their decision to approve or reject your loan application. When applying for a business loan for a small trucking company through a bank, they will look at the credit score for the owner of the business and the business itself. Often when trucking companies and other businesses are rejected by a bank for a loan, one of the reasons is that the credit score for the owner and/or the business were too low. A good personal credit score is typically considered to be a FICO score of 670 or higher.

Business credit history
This is a tough one for trucking companies seeking small business loans from a bank because oftentimes, you need financing early on as you are establishing, building, and growing your business. Banks typically like to see a personal credit history that is at least three years and a business credit history of a year or more in order to approve the small business loan for a trucking company. 

Business Performance and Cash Flow
Banks want to ensure you will be able to repay the loan so they will take a look at your funds coming in and your spending. They want to ensure you have money for your daily operations and are not in the red on your financials. If they determine that you have a weak business performance and inadequate cash flow, it could mean they will reject your loan request.

Existing Loans / Debt
Banks will take into consideration other debt that your business has, such as other loans, and will often reject a loan if you have existing debt. This is a main reason obtaining a bank loan is difficult for trucking companies since many have had to finance their equipment in order to get started. For more on financial considerations for acquiring new equipment when you start a trucking business check out part one of our series on Financial Considerations for Starting Your Own Trucking Business.

Insufficient Business Plan
You need to prove to the bank clearly and concisely that you have a solid plan for the direction and growth of your business if you want to be considered for a business loan. The plan needs to be written well, include details with no assumptions. This is the only factor you have direct control to change right away.

Other options when banks don’t approve a small business loans for your trucking company

Applying for a business loan through a bank can be a long and time-consuming process. When you combine that with their low approval rates, what should trucking companies do when they need funds? Luckily there are alternative financing options available that are easier, less time consuming, and have higher approval rates. One of those options is factoring for trucking companies. With freight factoring, the approval process takes only a few days and looks at the creditworthiness of your brokers and shippers and not yours or your business’. Plus, with factoring for trucking companies, your cash flow will be improved because you will receive funds within hours of delivering your loads and will no longer have to wait to get paid. Give us a call today at (801) 676-0182 to see if freight factoring could be the right fit for you and your trucking business.