SBA Commercial Vehicle Loans: What They Are and How to Get One
You may be able to finance your next business truck, van or car using an SBA commercial vehicle loan.
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Managing Editor SBA commercial vehicle loans provide financing for a wide range of new and used vehicles essential to running your business, from compact cars to semi trucks.
While the U.S. Small Business Administration (SBA) doesn’t have a standalone commercial vehicle loan program, most SBA loans can be used to finance a variety of business equipment, including commercial vehicles. You can use an SBA loan to buy, repair or upgrade a vehicle for business purposes. You may also use an SBA loan to refinance an existing commercial vehicle loan.
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How do SBA commercial vehicle loans work?
SBA commercial vehicle loans are offered by participating lenders and are partially guaranteed by the SBA. These business loans are meant to serve small-business owners who are having trouble securing more traditional financing. Individual lenders have the final say on who qualifies.
With an SBA loan, you get cash upfront to finance the purchase or repairs, and then repay your lender slowly over time, with interest.
SBA loans have competitive interest rates and offer favorable repayment terms. But there’s a catch: SBA lenders typically require borrowers to have good credit and an established business with a proven track record of success.
Which SBA loans can be used for business vehicles?
Many SBA loans can be used to finance a commercial vehicle. Here’s a snapshot of the options:
| Loan type | Maximum loan amount | Best used for |
|---|---|---|
| $5 million. | Most commercial vehicles. | |
| $500,000. | Making unexpected repairs, as Express loans fund faster than other types of SBA loans. | |
| $50,000. | Light-duty vehicles, such as cars and SUVs, as well as borrowers who have bad credit. | |
| $5 million. | Heavy equipment vehicles that can't travel freely on roadways without a special permit, such as backhoe loaders and cranes. |
Which vehicles can an SBA loan be used for?
The SBA doesn’t spell out which vehicles lenders are allowed to finance. Instead, it sets general guidelines for how SBA loans should be used when buying or repairing business equipment.
This means that whether you’re trying to buy your first work van to shuttle tools between job sites or you’re repairing a fleet of excavators, an SBA loan may help foot the bill, so long as it’s used for business purposes and you qualify.
Examples of commercial vehicles include:
- Cars.
- SUVs.
- Vans.
- Light trucks.
- Buses.
- Box trucks.
- Heavy equipment vehicles, such as bulldozers and cement mixers.
- Other specialty vehicles.
Pros and cons of SBA commercial vehicle loans
Here are the main upsides and drawbacks to getting an SBA loan to finance a business vehicle.
Pros
Competitive interest rates.
Long repayment terms.
Large loan amounts.
Can be used to fund multiple vehicles at once.
Cons
Can be hard to qualify for.
Can take months to receive funding.
Lots of paperwork required.
Down payment and collateral may be required.
Who should get an SBA commercial vehicle loan?
There are plenty of non-SBA loans out there that business owners can use to finance their next commercial vehicle, but it might be worth considering an SBA commercial vehicle loan if…
- You can’t qualify for a traditional bank loan. Traditional bank loans tend to have the most stringent qualification criteria, but usually come with best interest rates and terms. If you can’t quite meet bank standards, you may find SBA loans are a solid next-best option.
- You’re financing a fleet of vehicles. SBA loans have higher maximum loan amounts than many other types of loans. This makes it easier to finance an entire fleet of vehicles or several large construction vehicles at once.
- You need financing for multiple projects. With SBA loans, borrowers can bundle other purchases, such as real estate, other equipment or working capital within a single loan. This makes it easier for business owners to pay for multiple projects at once.
How to get an SBA commercial vehicle loan
Make sure you meet the basic requirements
While individual lenders and the type of SBA loan you apply for will dictate whether you get approved, there are some basic requirements you’ll likely have to meet, such as:
- Having a for-profit U.S. business that fits within the SBA’s size standards
. - Demonstrating your need for financing by having exhausted non-SBA loan options first.
- A personal credit score of approximately 650 or higher.
- At least two years of being in business.
» LEARN MORE: SBA loan requirements
Find a lender
There are many lenders that offer SBA loans. Your job is to find one that matches your needs while offering a competitive interest rate and repayment terms.
To start, check out NerdWallet’s list of best SBA lenders, which feature some of the most active SBA lenders. You can also use the SBA’s lender matching tool to get matched with potential lenders.
🤓 Nerdy Tip
It may help to start your search by prioritizing lenders that are part of the SBA’s Preferred Lender Program (PLP). These lenders often provide a more streamlined application experience and have a proven track record of issuing and servicing SBA loans. Gather paperwork and apply
Once you’ve found a potential SBA lender, you’ll need to gather some paperwork and apply. While the paperwork you’ll need depends on the individual lender and the type of loan you’re applying for, basic documentation includes:
- A business plan.
- Personal and business income tax returns.
- Business financial statements, such as a balance sheet and cash flow projections.
- Business license or certificate.
- Professional resume.
- Loan application history.
» LEARN MORE: How to apply for an SBA loan
Alternatives to SBA commercial vehicle loans
If you’re not sure if an SBA loan is the right fit for your business, consider these alternatives:
- Conventional bank or credit union loans. Like SBA loans, these tend to have competitive interest rates and favorable repayment terms. Just keep in mind: they can be even harder to qualify for than SBA loans, though they tend to have slightly faster approval times.
- Online lenders. Loans from online lenders tend to fund faster than SBA and conventional bank loans and have looser eligibility requirements, but you’ll likely have to pay more in interest and have a shorter repayment window.
- Direct lenders. Depending on the type of vehicle you’re trying to buy, you may find options directly from the manufacturer. For example, John Deere has special financing options for vehicles and other equipment used in agriculture, construction and forestry
. Direct lenders may offer more flexible terms and industry expertise not found in other lenders. - Leasing. If you can’t qualify for any of the above alternatives, leasing your commercial vehicle may be an option. Leasing tends to come with lower monthly payments than loans, but may be less cost effective in the long run. Some lease agreements even let you purchase the vehicle.
» MORE: Best business auto loans
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