Financing FAQ & resources to purchase/lease

I've seen a lot of threads about people looking for financing or they have questions about how the process works. I've worked in commercial lending for a while now and have learned a thing or two.

I represent C&C Finance, LLC, a lending institution specializing in financing trucks and trailers. We represent 10 major industry lenders, which enables us to "shop around" with these banks to obtain the most competitive financing terms. These 10 lenders are our company's proprietary information, and I can't disclose who they are (unless we finance your deal).

Our 10 banks communicate their lending guidelines to us, which primarily consist of: 1) your TransUnion credit report, 2) the length of time you have been in business or have worked as an owner-operator, and 3) the particular piece of equipment you are looking to purchase (the "collateral" from the bank's perspective).

Banks in this industry don't really care about your EquiFax and Experian credit scores, as these take into account slightly different variables than what TransUnion considers important. If you have any repossessions, bankruptcies, or derogatory remarks on your credit report, this affects how much of a down payment the bank will require more than anything else. Even if the repossession has been paid-in-full and there is no debt owed, the fact that there is a repossession on your credit report will automatically raise eyebrows at the bank.

Almost every bank will require 3+ years as an owner-operator or 3+ years of being established as a company (from the date the company filed articles of incorporation/organization). However, we represent a bank that focuses on owner-operators and companies who have only been around for 2 years. For obvious reasons, banks view you as less risky when you have more experience. I literally only know of one bank that will finance people who have been around less than 3 years (but at least 2).

The particular unit you are looking to purchase is the last "critical" component (aside from verifying your identity, etc. that banks do). This is the bank's collateral should you decide to stop making your agreed-upon scheduled payments ("default" on the loan). Most banks require the unit to be a 1) 2007 or newer, 2) have fewer than 700k miles (documentation showing complete engine rebuild if more than 700k), and 3) for the price to not be marked up too high relative to the wholesale/market value of the unit. Banks won't loan you $100k to purchase a truck that's only worth $20k, because in the event that you default on your loan, the bank will lose a significant amount of money even after repossessing and reselling the unit. The ratio of the loan amount to the wholesale value, "Loan-to-value" or "LTV" is a factor in every single credit decision made by any reputable bank. I've mostly see banks allow an LTV of up to 150% - that is, the loan amount is 1.5x the wholesale value of the unit. So if it's worth $100k (usually determined by major auctions such as Manheim), the bank will be willing to loan up to $150k.

Banks have underwriters and actuaries (statistical analysts), who gather historical information about all of the loans the bank has made, and they analyze thousands of variables to try and predict and assign a "value" to you, indicating how risky of a borrower you are relative to every borrower the bank has dealt with in the past. This is how banks determine minimum credit scores to qualify for financing, how much of an interest rate to charge, etc. In other words, banks analyze their historical information and use statistical models to determine where you fit in relative to every other borrower the bank has loaned money to. For example, banks may analyze every loan they've made in the past 5 years, and narrow their analysis down to something as simple as applicants who owned a checking account at the time. This is just one example of trying to determine the "cause and effect" relationship of something like owning a checking account, and if that has any impact on the likelihood of you defaulting on the loan.

From what I've seen, to qualify for "prime" financing through a mainstream/reputable lender (ie - not a loan shark), at minimum you will need:
1) credit score of at least 640-650 with no repossessions/bankruptcies/derogatory remarks
2) at least 2 years as an owner-operator or 2 years of being incorporated

If you don't have the length in time requirements, with the right credentials, you may qualify for a first-time buyer program. Generally, these requirements are:
1) 690-700+ credit score with no derogatory remarks, etc.
2) you've had your CDL for at least 5 years
3) you are a homeowner

If you have a credit score lower than 640, you will most likely need a co-signor, unless you have a huge down payment. This is the case with every bank I've seen in the industry.

Which brings me to my last point: if you are looking for financing, refinancing, or leasing options, give me a call at (864) 663-7553 and we'll do everything we can to make the deal happen. I can also be reached via [email protected] with your financing needs or questions.

At the very least, I hope this provides someone with useful information.