10 ways truckers can boost their prospects for financing

Equipment finance is a strange universe filled with fine print that can make the taxcode read like the comics. But there are two simple realities today if you’re borrowing to pay for a new truck. First, lenders will compete for your business, whether it’s the local bank, the truckmaker’s finance arm, or a third-party commercial lender. Second, the more creditworthy you are, the more competitive lenders will be. 

That's the advice of Scott Taylor, vice president of TFS Group, an accounting and financial services firm in Waterloo, Ont., that specializes in commercial trucking clients. Taylor offers 10 things you can do to improve your standing in the eyes of lenders and get the best deal.

"The returns for all that legwork can be considerable," he says. "Not only financially but also in the speed and ease with which the deal gets done."

Here's where to start:

1. Obtain a copy of your credit score from one of the major credit bureaus. Notarize the originals so multiple copies can be made and stamped as authentic. Include a copy with your financial statements if you seek credit from a captive or third-party finance source. 

2. Confirmation of a successfully filed and assessed tax return is virtually useless to a lender trying to determine your ability to service debt (although many still ask for it). Cash flow statements—quarterly or annual—are best.

3. Know your trade-in value by having your truck professionally appraised. It’s not expensive, and the appraiser can give you advice about how to present your used truck in the best possible light. Furthermore, a professional appraiser may be able to direct you to a dealer that has a particular affinity for the make, model, and year of your trade-in. 

4. Talk to your accountant. He can start the pre-approval process for financing even before you visit the dealership. He can run scenarios so you can compare lease or purchase transactions. It’s particularly important if you move from a conditional sales contract, where your truck was capitalized and placed in a Capital Cost Allowance class for tax planning purposes, to a leased truck. You don’t want the stunning, unexpected tax liability created through a misguided shift from owning to leasing.

5. Before you accept creditor life insurance, disability, or critical illness insurance as part of the finance package, compare similar plans and premiums with a licensed insurance broker.

6. Read the fine print. Make sure your accountant does, too. Identify early payout penalties, security agreements, or any other clause that commits you beyond the asset you intend to finance.

7. Lease or finance a purchase? Either way you don’t have title, so ignore the semantics and focus on the true costs, starting with an amortization schedule that reveals the hidden interest cost built into the lease. (Get help to do this and confirm your calculations.) Identify the lowest cost of ownership measured by the total amount spent to bring either finance option to a zero balance due. 

8. Talk to your banker about the limits that may be created on your ability to borrow for other assets (home, car, etc.) based on how you choose to finance your truck. 

9. Do you need flexibility on the payments? For example, if you have seasonal cash flow, a lender can build finance programs around it. Accelerated principal payout programs can balance a larger payment in the early part of the term where warranty coverage reduces operating expenses. 

10. Timing counts. Forecast your cash flow in the latter part of the contract as your expenses climb and warranties expire. Ask your lender about smaller payments later in the contract. And avoid loans that have a longer life than the truck you’re choosing. What looks like a good deal now—a low monthly payment—may be a nightmare at the end of your term.