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Owner Operator 411


18 February 2009

3) Getting Started – Financing and Credit for the Owner Operator


2001 K Whopper (Kenworth)

 Becoming An Owner Operator

3) Getting Started - Financing and Credit

See my other posts:

FAQ for the Owner Operator
Anti-Idling Regulations
Definitions and Industry Terms
Blackrock Auxiliary Power Unit (APU)
Interactive Cost per Mile (CPM) Calculator Spreadsheet
Privacy Policy
1) Owner Operator 411 – Welcome
2) Income and Expenses
4) Operating Authority or Leasing?
5) Equipment
6) How To Do Bookkeeping and Other Necessary Paperwork
7) What You Need to Know About Loadboards
8) Companies That Lease Beginning Owner Operators
9) What You Actually Need to Get Started - Licenses, Permits, Insurance, and Taxes
10) Truck Driving Schools

Now that you know how much money you can really earn, your next step, if you still think you want to be an owner operator, is to decide if you can afford it.

Do you want to be a truck driver, or a businessman? Most people think they can just buy a truck and roll, but there is a lot more to it than that. In the first place, a truck can cost anywhere from $30,000.00 for a used one to $150,000.00 for a new one.

You have to look a your complete financial picture and figure out if you can even afford to purchase a truck, much less all the expenses that go along with it.

First, you want your new business to be a money making enterprise, so you don't want to start out too much in debt. Your truck payments will run from $1,000.00 to $2,500.00 a month. As you can see, you will have to have a good credit history before you can even buy a truck.

Many banks and credit unions will want a written business plan when you try to get a loan. This will tell them how you think you will be able to pay back the money you borrow from them.

The first thing you need to do is check your credit report and Fico score before even applying for a loan. Everyone is entitled to an annual free credit report from each of the three credit bureaus: Equifax, TransUnion and Experian. Check with all three, as they do not provide the same information. If you find any mistakes, have them taken care of before you try to get a loan. Banks will look at your Fico score. The credit bureaus will let you buy your credit score. These are not the same thing, but a credit score should give you an indication of your FICO score (if one is high the other should be high, and vice versa.

Before you try to get a loan, you need to get your business license, so that you can get a business loan. I will write about setting up your business structure (sole proprietor, partnership, LLC, S corporation, or corporation) in a later post. I was going to do that in this post, but decided to wait because if you can't buy a truck, there isn't any reason to start a business, so we need to concentrate on financing before we start talking about ways to make money. In a way, it is just like the old saying, “You have to have money to make money.”

See: Types of Entities in Section 6) How to Do Bookkeeping and Other Necessary Paperwork for the Owner Operator - Permits and Taxes
When we bought our first truck, we paid $3,000.00 for it and the person we bought it from financed it for us. Boy! Are those days ever gone. Diesel was 34 cents a gallon, milk was 50 cents a gallon, and I walked 5 miles to work, uphill, both ways, in the snow, winter and summer.

Seriously, though, we went into debt to get our first truck, and so will you. In planning how much you need, don't forget all the other expenses. If you don't buy a brand new truck, you will probably have to put some maintenance into it before you can put it to work. If you are lucky enough to find a truck that really is ready to go on the road, you still aren't out of the woods. On your very first trip, all kinds of bad things can happen, and you need to be prepared. You may blow a tire and have to replace it (cost about $250.00), or you may blow an engine (cost $10,000.00 and UP)

Not only do you have to have the money to pay for these things, you will have to have the money to live on while you are getting the repairs done. If you blew an engine, it can take a week or more to have it repaired or replaced. Don't forget that $1,000.00 to $2,500.00 truck payment. If you are down for a week, you still have that payment coming due (and other fixed expenses like owner operator insurance, taxes, and licenses) – and you are not only spending money for repairs, you are not making any money. The moral is, you need to have some extra money in the bank to fall back on.

Anyone can have breakdowns, anytime, for any reason. I knew a guy once who bought a brand new truck and he had to have the engine replaced 3 times in a year. Yes, it was under warranty, but as I said above, he still had payments coming due, and no income each time it was in the shop having the engine replaced.

Of course, he had a lemon, and it is unusual for something like that to happen, but it does go to show, you just never know. I would like to say the best way to not have a breakdown is preventive maintenance. I can't stress that enough. If you hear a whistle in the turbo, don't just sing along with it until it becomes a scream. Have it fixed at the very first chance you get. Believe me, it will pay off in the long run.

If you can get the financing, in a way now is a good time to buy a truck. Many truck drivers are selling their trucks because of the bad economy, and you may be able to find one cheaper than you could have a year or two ago. For some reason, though, truck prices haven't dropped very much – but the freight has. 

As more and more companies are laying off workers and cutting back on production, they aren't making as many goods, so they don't have as much to ship. You may be able to buy a truck, but you may not have anything to haul. Like almost everything else today, truck driving jobs (even owner operator trucking jobs) are hard to get.


SCORE: This is an excellent resource, and best of all, it is entirely free! They have mentors, online or in person to answer your questions and help you make business decisions. They have online workshops, including one titled, “Can you afford to start?” which will help you answer a lot of the questions raised in this post. If you are serious about starting your own business, don't skip this website.

SBA (Small Business Administration): They have information about all kinds of things to do with small businesses, as well as online training about how to start a business and how to write a business plan. They even give loans.

OOIDA (Owner Operator Independent Drivers Association): They give out tons of advice, publish a magazine, make equipment loans, and sell owner operator insurance and truck insurance.

An accountant: They can do tax consultation as well as bookkeeping.

Your local bank or credit union: In addition to making loans, some have legal departments which can help you set up a LLC or corporation.
If you have a favorite resource, let us know and share it with others.

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I am sorry I have to do this, but due to spam "comments"  I feel I need to moderate comments from now on.
I am sorry for any inconvenience this may cause to my legitimate commenters.


Anonymous said...

Hey, I have been a company driver for 20 years and am thinking about taking that plunge...I really appreciate people like yourself. You sure don't have to go out of your way to do this, but you are. I can tell that you are an "old timer." One of the few that will still help out another trucker. You sure dont see much of that anymore. Thank you very much.

Road King said...


Thank you for your kind words. I like being able to help people. I just hope I don't come off like a know-it-all or being preachy.

As you know, I keep telling everyone not to start their own business, but in your case, I think an exception can be made.

You have been driving long enough you know what trucking is all about. You are in a position where you can see who has freight and who doesn't. You have a 50% jump on most of the people who think they want to be an owner operator and make big bucks, but have never even seen the inside of a semi.

If you do decide to do it, I hope you succeed. Just keep in mind that owning your own truck with all the headaches is a lot different than just driving. I will be writing more details about that in a later post. So stay tuned everyone, and don't forget to subscribe.

Mike Douglas said...

I'm having some trouble writing my business plan to buy a truck. I'm not sure what to put into it. I don't really have a marketing plan so I can't include that. I have the financial information from the person who is selling me the truck but that's about it. Any advice would be greatly appreciated.

Road King said...

Mike Douglas,

You didn't say if you will be getting your own authority. It will make a difference in getting financing. Do you have trucking experience? It'll be easier to get a loan if you do.

The financial information from the previous owner may not be much benefit to you. Here's why: will you be hauling the same loads & getting the same income? Your payments will be different. Will you be working as hard as he did? Maybe he stayed out on the road for 2 weeks at a time and you want to be home every weekend. These are all things to consider.

Even information such as fuel economy may not mean much. If he hauled light loads in the flatlands and you will be pulling heavy ones in the mountains, your fuel mileage will not be the same.

By the way, why is he selling? Are you sure there is nothing wrong with the truck? Is it due for an overhaul? Is the transmission ready to go out? How is the suspension? Does it need tires (a set of new tires will cost you about $3,000)? Does he have maintenance records?

If you will be leasing your truck to a carrier, you may not need a business plan. All you may need to do is get an equipment loan.

If you will be leasing your truck on to a company, do you know how you will be paid - mileage or percentage of load?

Try OOIDA (Owner Operator Independent Driver's Association) at

They will want to verify that you will be getting a lease, your expected income, assets, other debts, etc.-standard loan information. Call them and ask them what you need to do to get a loan. They understand truck drivers and trucking, and are very good at helping, by explaining what you need in language a person can understand, not a bunch of legalize.

Even if you don't go that route, it wouldn't hurt to talk with them in advance of trying to get a loan elsewhere.

If, on the other hand, you will be getting your own authority, you will need to show how you expect to make money. This is usually when you need to have a business plan. Will you have a contract with a shipper(s)?

OOIDA can also help you get your own authority.

A business plan is nothing more than a "blueprint" of what you expect to earn and what expenses you expect to have.

It can be simple, or complicated. Either way, it should be neat, complete, and with supporting documents.

A good business plan will convince the lender that you will be able to make a go of your venture.

So... you need to put in writing (preferably computer printed) everything that a lender needs to know about how you plan to earn, what your expected costs will be, what your expected expenses will be, how you will manage in case of a breakdown (where will you get the money to overhaul your engine, for example), what will you live on and continue to make your equipment payments with while your truck is in the shop?

Don't forget to factor in taxes, permits, licenses, rising fuel costs, and enough for you to live on after all truck expenses are paid.

Why do you think you can be successful? I'm sure you have already answered that question to your satisfaction, now you need to convey that to the lender. Do you have experience in trucking? Do you have an idea of what the costs involved are? Do you know the cost of fuel or a transmission?

Most lenders want a projection of at least 1 year and some want up to 5 years. Before you begin to write your plan, you might consider calling your bank, loan company, or credit union and ask them what they require.

Use the interactive CPM spreadsheet (if you haven't already) to find the answers to these questions. Be realistic in your estimates. If you can't honestly come up with numbers that look good on paper, then you won't be able to make a go of it.

Getting a loan in today's economy is not easy. If you have very good credit, it will be easier, but not guaranteed.

My eBook explains a business plan, and a lot more, in detail.

If you have more questions, please let me know.

Good Luck!



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