Commercial fleet financing is a critical aspect of managing a fleet. Whether it's a small fleet with a few delivery trucks or a large corporation with a vast fleet of vehicles, financing is essential to ensure the vehicles remain operational and efficient.

However, with the plethora of financing options available, it can take time to navigate and find the right fit for a company's specific needs.

To help explore this, Work Truck spoke with Joe Camberato, CEO and founder of National Business Capital, on what commercial fleet financing is, the current trends, and the options available.

General Aspects of Commercial Fleet Financing

What is commercial fleet financing? Only some companies can afford a full fleet of vehicles, plus upgrades and maintenance. That’s where financing comes in. It gives fleet managers the funds to maintain, upgrade, or add to their fleets.

According to Camberato, there are several benefits to financing a fleet:

• Budgeting is easier.

• It preserves cash flow.

• Allows businesses to increase purchasing power and afford larger vehicles.

“You can secure a lump sum of funds through equipment financing, term loans, and revenue-based financing. Or, if you prefer, draw capital on an as-needed basis through a business credit line — the choice is up to you. Financing is an invaluable tool for growing businesses,” Camberato said.

If you’re deciding if financing is the right fit for your company, Camberato advised considering the following: 

• No. 1 — Determine if financing a vehicle is a better fit for their business than leasing one. In many cases, financing is a more advantageous option because the borrower owns the equipment after it’s paid off, and the purchase can qualify for tax deductions, like Section 179. Still, it’s not the best fit for everyone, and fleets that don’t need to own their vehicles outright may benefit more from leasing them.

• No. 2 — The loan agreement's long-term costs. This might include interest payments or maintenance fees, so carefully read the fine print of any contract before signing it.

• No. 3 — Most importantly, shop around and get quotes from multiple lenders to ensure the best deal.

Current Trends Financing Commercial Work Trucks

The current trends in commercial truck financing are usually determined by one defining factor: supply and demand.

Because of the supply chain challenges occurring in the past couple of years, truck dealers have a limited inventory. And with limited supply comes fluctuating prices.

“When someone has trucks available, entrepreneurs buy them faster than the dealer can restock, creating a landscape where only the fastest can secure the vehicles their business needs. But it isn’t only vehicles; Fuel price has increased while load size has diminished, which has reduced profit margins in companies nationwide. The cost of rentals has gone up, too. All in all, it’s much more expensive to keep your trucks on the road,” Camberato explained.

“Through commercial fleet financing, you can bring cash to the table and lock in your purchase before another business can swoop in. Equipment financing typically works fast, and you can have your funds distributed within 24 hours, depending on the lender you work with. It’s a great solution that entrepreneurs in the industry have leveraged to grow their businesses despite the scarcity. As for fuel and operating costs, working capital loans can provide some much-needed liquidity to help businesses handle rising costs,” he added.

Biggest Challenges When Financing Work Trucks

When it comes to financing, the economic climate is the biggest challenge.

It can be broken down into:

• The Federal Reserve’s prime rate hikes.

• Inflation.

• Possible recession.

• Bank lenders tighten guidelines and become selective.

Camberato imagined the situation will likely only improve once the economy improves.

But it’s important to understand that fleet managers can still leverage financing to strengthen their fleet.

Non-bank lenders currently offer rates like traditional banks and SBA loans (or small-business loans). While these can be higher, the cost of capital becomes negligible if the growth experienced afterward outweighs the interest payments.

“Let’s say you finance a $100,000 commercial truck at a 1.25-factor rate over three years. At the end of the loan, you’ll have paid $25,000 in interest, but having the truck on the road generates $2,500 in revenue per month. In 10 months, you’ll break even and, more importantly, still have the truck on the road, generating revenue. Non-bank lenders also have less restrictive eligibility criteria, faster funding times, and a digital application process better suited for the modern entrepreneur. If you aren’t able to work with a bank, it’s worthwhile to research these organizations and see if their terms fit your business and where it’s headed,” Camberato explained.

Different Options to Secure Work Vehicles

Regarding the options, you must first decide if you’ll finance or lease the trucks in your fleet.

The most significant benefit of leasing is that it’s less expensive in the short term. But the downfall is that you won’t own the vehicle when the contract ends.

If you need to continue using the truck at the end of your lease, you’ll have to open a new contract and start the cycle over.

Camberato said, “This option is most beneficial for businesses that don’t rely on their fleet as their main revenue driver, although there are niche situations where a business with an extensive fleet would benefit from leasing.”

As for financing, it’s more beneficial in the long term, as you get to keep the vehicle once it’s paid off.

“You can also qualify for tax deductions by financing a truck, so make sure to speak with your tax advisor about these benefits before you make any final decisions,” Camberato added.

If you decide to finance your work truck fleets, several programs are available.

“Equipment financing is most common for commercial work trucks, but you can use term loans, revenue-based financing, or even SBA loans to purchase trucks if you feel the offered terms better suit your needs. For the best results, speak with more than a few lenders and compare their programs. Or, if you want a faster process, work with a FinTech marketplace, where you can apply to multiple lenders with one application,” Camberato concluded.

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