Got Financing?
In order to qualify for SBA, fleets cannot have a tangible net worth that exceeds $15 million or average net income (based on Federal Income Tax Returns) greater than $5 million over the past two years. And although many in the trucking industry would describe their business as “non-profit”, SBA requires the applicant to be a for-profit business entity, so no churches or other not-for-profit endeavors.
One great feature of SBA is the tremendous flexibility how loan proceeds may be expended. Loans may be used for equipment, business-occupied commercial real estate, business acquisition and working capital for business expansion. Generally, 95% of US businesses qualify, and for eligible transportation businesses, the SBA program may offer the perfect opportunity to offset the rising costs of clean equipment by helping fleets manage capital expenditures with lower down payments and longer terms. And with a maximum loan amount of $5 million, the SBA 7(a) program will also help fleets ensure that no matter how expensive meeting the clean air standards gets SBA can help. And in the ever evolving realm of Air Quality standards, fleets need all the help they can get.
Matt Schrap is VP Government Programs for Crossroads
Equipment Lease and Finance and President of California Fleet Solutions he can
be reached at mschrap@cafleetsolutions.com
Government Guarantee Financing for Clean
Truck Purchases
In California, most trucking fleets have become accustomed
to the robust lexicon of regulatory measures which have resulted in billions of
capital outlays to meet air quality standards. It has been argued that currently,
the California based Heavy-Duty trucking fleet is the cleanest operating fleet
in the world. The sour smell of uncontrolled diesel emissions is a thing of the
past in the Golden State and citizens should thank fleet operators for this
clean air reality.
This reality, of course, has not been without major
challenges. Many fleets have handed in the keys because they can no longer
afford to stay in business. While many more have seen the value of their retirement
assets dwindle into something resembling a Madoff managed retirement account.
Beyond California, the Federal Government has been slowly
implementing stricter engine efficiency and emissions controls dating back to
the 1990’s; mostly driven by California. These Engine standards are a steadfast
requirement that Original Equipment Manufacturers (OEMs) must meet in order to
make an engine for sale in the United States.
The current and future Federal standards, affectionately
referred to as the Phase 1 and Phase 2, are the latest reason for the
astronomically high costs of new, heavy-duty trucking equipment. While Phase 1
standards increased per truck costs by more than $6,000. Cost increases for
Phase 2 standards may reach up $13,000 per truck. And of course, the higher the cost of the new
truck, the higher the cost of that same truck in the used truck
marketplace.
Outside of limited incentive funds, fleets, whether they
know it or not, may be eligible for government guaranteed financing programs
that can help manage cash flow through lower down-payments and longer terms
with both fixed and adjustable interest rates. The longer term financing, up to
10 years in some cases, provides operators with a lower monthly payment, which
helps to conserve cash for working capital to create jobs and expand
operations.
In California, the California Pollution Control Finance
Authority and the California Air Resources Board offer a truck finance program
to a limited pool of eligible fleets. The
program, known as the CalCAP On-Road Loan Program restricts eligibility to
fleets with 10 or fewer trucks over 14,000 pounds Gross Vehicle Weight Rating
(GVWR). To qualify, fleets must agree to
purchase 2007 or newer engines and adhere to California travel thresholds. CalCAP
has a maximum interest rate of 20% and provides loan coverage for 10 years. However,
few, if any lenders offer the 10 year term on equipment purchases, while 20% rates
are more common than one would think.
Nationally, the U.S. Small Business Administration (SBA)
7(a) loan program maintains no fleet size restrictions, no travel restrictions
and interest rates are capped at a much lower maximum. Using current rates, customers would see a 6%
cap for floating rates and an 8% cap for fixed rates. For many fleets, obtaining capital at these
costs may not be a reality, with SBA the reality is not only available, but
achievable. In order to qualify for SBA, fleets cannot have a tangible net worth that exceeds $15 million or average net income (based on Federal Income Tax Returns) greater than $5 million over the past two years. And although many in the trucking industry would describe their business as “non-profit”, SBA requires the applicant to be a for-profit business entity, so no churches or other not-for-profit endeavors.
One great feature of SBA is the tremendous flexibility how loan proceeds may be expended. Loans may be used for equipment, business-occupied commercial real estate, business acquisition and working capital for business expansion. Generally, 95% of US businesses qualify, and for eligible transportation businesses, the SBA program may offer the perfect opportunity to offset the rising costs of clean equipment by helping fleets manage capital expenditures with lower down payments and longer terms. And with a maximum loan amount of $5 million, the SBA 7(a) program will also help fleets ensure that no matter how expensive meeting the clean air standards gets SBA can help. And in the ever evolving realm of Air Quality standards, fleets need all the help they can get.
Contact Crossroads Equipment Lease and Finance at
1-866-465-0181 for more information on SBA or CalCAP.
