If you’re looking to buy a vehicle for your business, there are several different ways you can finance the purchase. 

Business auto loans and equipment loans can be a good place to start, but if your business meets the requirements for an SBA loan, that should be on your radar as well.

Here’s what you need to know about SBA commercial vehicle loans, how they’re structured, and what you should expect in terms of eligibility requirements.

Can You Buy a Commercial Vehicle With an SBA Loan?

Yes, it’s absolutely possible to buy a vehicle for your business with an SBA loan. Depending on your needs, eligibility, and the loan program you apply for, you may even be able to use one of the government-backed loans to purchase multiple vehicles.

It’s important to note, however, that there are no specialized SBA commercial vehicle loans, at least not in the same way that business auto loans and equipment loans are specialized for the purpose of buying a vehicle or some other form of equipment.

That said, there are a handful of SBA loan programs that allow business owners to use funds for a variety of things. 

One of the benefits of using an SBA loan to finance your vehicle purchase is that they tend to offer some of the lowest interest rates and most generous repayment terms. 

That’s because the Small Business Administration (SBA) insures up to 85% of the loan amount, depending on the program and the value of the loan.

Keep in mind, though, that SBA loans can be difficult to qualify for, especially if your business is still relatively new. 

Also, you can generally expect it to take two to three months to complete the loan process and receive your funding. With that in mind, it may be worth it to compare SBA loans with other business financing options based on your current situation and needs.

Types of SBA Loans You Can Consider to Buy a Commercial Vehicle

There are several different types of SBA loan programs available, and while not all of them allow you to use your loan funds to buy a vehicle, there are a handful of programs that do. More specifically, here are the programs that allow you to finance equipment, which includes vehicles:

• SBA 7(a) loans
• SBA 7(a) small loans
• SBA Express loans
• SBA Veterans Advantage loans
• SBA Community Advantage loans
• SBA microloans

Here’s a quick summary of each of these loan programs, which can help you determine which one is the right fit for you and your business. 

SBA 7(a) Loans

The SBA 7(a) loan program offers loans up to $5 million, giving you plenty of flexibility if you need more than one vehicle or even a fleet of vehicles. 

The loan repayment term is based on your ability to repay. But the government agency provides a range that runs from five to 10 years, with the caveat that the loan term shouldn’t exceed the life of the equipment you’re buying.

There’s a guarantee fee, which applies only to the portion of the loan that’s being insured, that you’ll need to pay upfront. 

The fee can be as high as 3.75%, and it’ll be deducted from your loan disbursement. There may also be an annual service fee of up to 0.55% of the guaranteed portion of the outstanding balance.

If your loan amount is more than $25,000, you may be required to provide collateral, which can be the vehicle you’re purchasing. 

SBA 7(a) Small Loans

The SBA 7(a) small loan program mirrors the 7(a) loan program in most ways, except for a couple of key differences.

For starters, this loan program is designed for smaller financing needs, maxing out at $350,000 instead of $5 million. Second, in addition to the regular eligibility criteria you’d deal with if you were to apply for a 7(a) loan, this program also includes a credit screening by the SBA. 

The federal agency’s minimum credit score requirement is a FICO Small Business Scoring Service (SBSS) score of 155, but some lenders may require a 160 or 165 at a minimum. 

Note that this is just one of many business credit scores, and some lenders may use others in their lending decisions.

If you need to build business credit in order to become more eligible for loans, then opening a credit builder loan from Credit Strong is a great step to do so!

SBA Express Loans

SBA Express loans also come with many of the same terms as the 7(a) loan program, but this loan program can provide a faster turnaround time between application and funding. Instead of a turnaround time from the SBA of five to 10 days, you can get a response within 36 hours.

Of course, you’ll also need to wait on the lender, which can take additional time. But if you need funding a bit faster, consider an SBA Express loan.

This loan program maxes out at $500,000, and the credit decision is strictly up to the lender, so make sure you know its eligibility requirements before you apply for a loan. Repayment terms can range up to 10 years.

SBA Veterans Advantage Loans

If you’re a qualified veteran, this loan program may be the right fit for you because it’s tailored specifically for the needs of a veteran-owned business. Loans can be processed as an SBA Express Loan or a 7(a) loan, and your term can be as much as 10 years.

To qualify, your business needs to be at least 51% owned by one of the following:

• Honorably discharged veterans
• Active Duty Military service member eligible for the military’s Transition Assistance Program
• Service-disabled veterans
• Reservists and/or active National Guard members
• Current spouse of any veteran, active duty service member, Reservist, National Guard member, or the widowed spouse of a service member who died while in service or as a result of a service-connected disability

One of the benefits of the program is fee relief. Depending on the size of your loan and how it was processed, you may not be subject to an upfront guarantee fee at all. You can get more information about the fee tiers using the SBA’s Veterans Advantage loan fact sheet.

SBA Community Advantage Loans

This loan program is designed for small businesses in underserved markets and communities. It may be worth considering if you’re a new business owner, you operate in an industry that’s considered to be risky, or your business is owned by women, minorities, or veterans.

The program was initially set to expire in early 2020, but it’s been extended through September 2020. 

Loan amounts range as high as $250,000, and repayment terms can go as long as 10 years. Your SBSS score can be as low as 140 with this program, and the guarantee and service fees are the same as the 7(a) loan program.

SBA Microloans

The SBA microloan program functions similarly to the Community Advantage program in that it’s designed to serve minority communities and newer small businesses. 

The loan program maxes out at $50,000, which may rule out some business owners. The repayment term can go as high as six years but depends on the amount, your planned use, the lender’s requirements, and your needs.

The Bottom Line

If you’re looking for SBA commercial vehicle loans, there are several loan programs available. 

Take some time and research each one to get an idea of what you can expect in terms of the loan amounts, repayment terms, interest rates, business credit minimums, collateral requirements, and fees. 

You can find lenders that offer the loans you’re interested in using the SBA’s Lender Match tool. Depending on your qualifications, you may also consider equipment financing, business auto loans, and other financing options, just to make sure that you get the best deal possible.

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