Term Loans for Trucking Companies: Capital for Fleet Growth and Repairs

Term loans occupy the middle ground in trucking finance — more flexible than equipment financing, faster than SBA loans, and more structured than lines of credit. For trucking companies adding 1-3 trucks, facing major repair bills, or needing to upgrade for compliance, term loans often hit the sweet spot.

Understanding when term loans make sense versus other options can save significant money and headaches.

When Term Loans Beat Equipment Financing

Equipment financing is the default for truck purchases, but term loans sometimes work better:

• Mixed-use funding — Need a truck plus working capital for operating costs during ramp-up
• Older equipment — Equipment lenders have age and mileage limits; term lenders are more flexible
• Existing liens — Already financed the truck but need additional capital
• Non-equipment costs — Compliance upgrades, technology, or facility improvements
• Speed requirements — Some term lenders fund faster than equipment finance companies

Typical Term Loan Uses in Trucking

Term loans address needs that do not fit neatly into equipment financing:

Term Loan Structures for Trucking

Term loans for trucking typically range from 1-5 years with monthly payments. Here is what affects your terms:

• Loan amount — $50,000-$500,000 is the sweet spot; below or above may have different product fits
• Credit profile — 650+ credit score for most term lenders; 700+ for best rates
• Time in business — 2+ years preferred; some lenders work with 1-year companies
• Revenue requirements — Most lenders want $250,000+ annual revenue
• Collateral — May be secured by equipment, receivables, or general business assets
• Personal guarantee — Almost always required for small trucking companies

Real-World Scenario: Fleet Maintenance and Growth

The situation: An owner-operator with 4 trucks needs to address deferred maintenance on two older units and wants to add one more truck. Total need: $85,000 for two major overhauls plus $140,000 for a 3-year-old used Peterbilt.

The challenge: Equipment financing is not available for the overhauls, and the used truck is 3 years old with 380,000 miles — at the edge of most equipment lenders' criteria.

The solution: A $225,000 term loan with 4-year term at 12.5%. Monthly payment approximately $6,050.

Why it worked: The term loan covered both the maintenance and the truck purchase in a single transaction. The owner had strong personal credit (720) and 5 years in business. Combined with existing paid-off equipment as collateral, the lender was comfortable.

The alternative considered: Separate equipment loan for the truck plus a business line of credit for repairs. This would have had slightly lower blended rate but required two applications, two closings, and two payment obligations to track.

Compliance Upgrade Financing

Regulatory requirements create capital needs that do not fit equipment financing:

• ELD mandates — Electronic logging devices run $500-$2,000 per truck installed, plus monthly fees
• California emissions compliance — CARB requirements may require engine upgrades or truck replacement
• Hours of service technology — Advanced systems for fleet management
• Dash cameras — Increasingly standard for insurance and liability protection
• Safety equipment — Collision avoidance, lane departure, and other safety tech

For a fleet of 15 trucks needing $2,500 in compliance technology each, that is $37,500 — too small for SBA, does not qualify for equipment financing, but fits perfectly in a term loan.

Comparing Term Loan Offers

When evaluating term loan options, compare these factors:

• APR vs. factor rate — Some lenders quote factor rates (1.25x) instead of APR. A 1.25 factor rate on a 2-year loan is approximately 22% APR.
• Origination fees — Typically 1-3% of loan amount; factor into total cost
• Prepayment penalties — Can you pay off early without penalty?
• Payment frequency — Monthly is standard; weekly or daily payments increase effective cost
• Collateral requirements — Understand what is pledged and implications
• Personal guarantee scope — Full guarantee vs. limited guarantee

Term Loan Qualification for Trucking

Beyond standard underwriting, trucking term loan applications benefit from demonstrating:

• Operating authority status — Current MC number, insurance, USDOT registration
• Safety record — Clean CSA scores strengthen applications
• Equipment list — Shows unencumbered collateral and operational capacity
• Customer diversity — Multiple shippers reduce concentration risk
• Rate stability — Consistent per-mile revenue shows operational strength
• Fuel management — Fuel cards, hedging programs, or cost controls demonstrate sophistication

Short-Term vs. Long-Term Considerations

Term loan length affects both monthly payment and total cost:

Match your loan term to the useful life of what you are financing. A 5-year loan on technology that will be obsolete in 3 years creates an upside-down situation where you are paying for equipment you no longer use.

When to Avoid Term Loans

Term loans are not always the right answer:

• Large fleet purchases — SBA loans cost less for $500,000+ equipment purchases
• New equipment with strong residuals — Equipment financing offers better rates
• Short-term cash needs — A line of credit provides more flexibility
• Working capital only — Revenue-based financing or lines may fit better
• Distressed situations — If cash flow cannot support fixed payments, term loans accelerate problems

Term loans work best when you have a defined capital need, want a fixed payment structure, and can comfortably service the debt from existing operations.

For trucking companies evaluating term loan options, Liminal connects you with lenders who understand the industry. The matching process is free, takes about 2 minutes, and does not affect your credit score.