Requirements Regarding Gaining Truck Finance

Every industry, be it big or small is very dependent on the transport system. It doesn’t really come as a surprise that the demand for bigger trucks is going up with each passing day. One can clearly explain this by the fact that every market product bought or sold worldwide makes good use of trucks. With the development in the field technology, trucks are becoming more fuel efficient by the day making it a preference for the transport facility across the globe.

The pocket pinch while purchasing one of these trucks can be quite heavy, making finance an absolute necessity. Getting the right finance company to help you with a truck is not an easy job especially because of the big sum of money involved. The sellers usually have tie ups with financers to help you out with the truck finance. If not then you can easily approach one of the many finance companies providing truck loans. A list of such companies can be found with the truck dealer and is also available online. The question now is about the requirements for gaining the truck lease.

There are two basic types of Truck Loans available today, i.e. secured and unsecured.

Secured Loans: This type of a loan will require you to place a few of your assets like your home, car, or office as collateral. These assets in the event of non payment of the loan can be forfeited by your financer. This is a more preferred type by the lenders but is not an easy come as far as non-homeowners and poor credit holders are concerned.

Unsecured Loan: This type of a loan does not require you to place collateral and is apt for non-homeowners. The lender here runs the risk of not getting his money back. The usual repayment period is five to seven years. This type of loan is not very easy to get because you are not turning in anything as collateral. Your financer will need to be confirmed that you are in a financial state to repay the loan. You’ll need to have a job with a regular good payment. Your credit records will also be scanned for checking how you have handled your credits in the past.

Australian truck finance has been very market friendly for years and other countries are following its example too. Generally the financers ask for documents like Driving Licence, Medicare card, etc. The vehicles insurance papers are also a must. Some of the new truck loans offer you to include the insurance in the loan amount. Bank statements and your credit history will be another important requirement. The financer will also be interested in checking your list of assets to make sure that you have a well to do background. Generally a guarantor and a couple of local references is also a requisition for the financers. On an average a down payment of around 20% will be required while taking the loan and the repayment time varies from 2 to 7 years.

A Description and History of Accounts Receivable Financing Loans

An accounts receivable financing loan is exactly what it sounds like. Your business can take out a loan against money that is owed to you, so it’s essentially borrowing from yourself. When you need money quickly, it could be that untried option that you’ll actually get approved for. If you find the right bank or lending institution, you might even be able to negotiate reasonable short term repayment and get an affordable interest rate. Some banks right now are offering less than 2% for loans of up to thirty days. That extra month can be a huge boost if you’ve just made a large sale of existing inventory and need cash to purchase additional inventory while you’re waiting for payment on the last sale.

The difference between an accounts receivable financing loan and more traditional loans is that banks look at the credit score and payment history of those who owe you money instead of your own history. For those with bad credit or companies just starting out, it may be advantageous to have the bank look at the customers you’re invoicing instead of you when you’re attempting to get your hands on some working capital financing. Traditional loans are always hard to come by, especially in this economic climate, unless you happen to have stellar credit or lots of collateral.

What is Factoring?

One of the oldest financial practices for merchants having difficulty making ends meet is the sale of accounts receivable for a percentage of what they are worth. This process is known as factoring, because when you sell your accounts receivable, you sell them to a factor. The practice is very common in the debt collection business. That’s why you often hear from multiple collection agencies on the same debt. The first one will attempt collection and then sell it to another agency, one that is actually a factor, for a percentage of the paid value of the debt. They then use the cash to expand their business or purchase debt from other agencies.

Your bank may not offer to buy your account receivables outright, since they’re not in the business of purchasing debt, but there are a number of agencies and online sites where you can find someone to take those unpaid invoices off your hands. What you want to do when shopping for this type of loan is to seek out the highest percentage of debt that factors are willing to offer. They won’t pay dollar for dollar, so don’t waste your time asking, but some will give eighty or ninety cents per dollar if they can see a strong likelihood of receiving prompt payment.

History of Factoring and Accounts Receivable Financing

The practice of buying someone’s debt in return for cash goes back to pre-colonial England, when merchants would sell their invoices in return for cash to pay workers and finance trade ventures. Since many of these merchants ran small operations, the credit worthiness of their buyers was evaluated before the money was given. Just as it is today with smaller companies selling goods and services to larger, more credit worthy companies, back then the merchant himself couldn’t get financing unless he had firm commitments from larger distributors and retailers. This early form of accounts receivable financing loan laid the groundwork for what would become an invaluable source of financing in the late 19th and early 20th Century.

After the Civil War in the United States, new markets opened up with the development of what was at the time considered advanced technology. The invention of the cotton gin in 1793 had actually given merchants the tool they needed to mass produce textiles, but transportation methods were still primitive. By the 1870′s, steam engines and iron clad ships were making the world a smaller place and telegraph lines made communication much simpler. The industrial revolution began and once again small companies and independent merchants were selling goods and services to larger manufacturers and textile mills. Factors became popular again and banks began to issue their own version of accounts receivable loans.

Who are the Best Candidates for AR Financing Loans?

The small company with little or no credit selling to the large corporation with an established payment history is the best candidate for this type of loan. As more and more people are using the internet to strike out on their own, the banks see an increase in the number of applicants for this type of funding. Think of the independent programmer designing apps for iPhones or Blackberries. The company buying those apps will probably take a while to make payment for them, but their invoice is considered as good as cash by a financial institution because they have top-of-the-line credit. Take out a thirty day loan against those invoices and you’re looking at an interest rate of as little as.69% in some cases and a maximum of 1.59%.

Economic Roadblocks and Reasonable Alternatives

When the nation or the world is experiencing a period of rapid growth and a growing economy, the banks are more likely to lend money using the accounts payable financing loan option. With the situation being what it is today, you’ll have to show growth within your industry and present invoices that are going to established companies in no danger of going under. Many of the big players in the retail industry, once considered untouchable, have gone out of business in the last few years, victims of over-leveraging during a brutal recession. Banks and other lenders took a hit when those companies defaulted and they are being more cautious now as a result.

That is not to say that getting a loan is impossible. Look for short term schedules and ask for smaller amounts when you first start seeking this type of financing. If you have clients or customers who have been established for a while, present their invoices to the bank. They count as collateral. If your clients are relatively obscure and have little or no credit worthiness, try using your credit card sales numbers and ask for a merchant account cash advance. You might have better luck with one of those.

Copyright (c) 2010 Trey Markel