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Many transportation companies, at one point or another, will consider commercial financing in order to obtain an important piece of equipment such as a heavy duty truck or trailer. This can be an exciting time for business owners, or it can be a stressful time, and the commercial financing company that you work with can make that feeling swing either way. It is highly recommended that you find a good, reputable commercial financing company with which to do your business. It is also highly recommended that you educate yourself on a few of the commonly used terms in the industry so that you will not feel left in the dark in any circumstance. One of the commonly used words that you will frequently hear is the word “term.” The word “term” is referring to the number of months for which your equipment will be financed. For example, “You have been approved for a 60 month term.” Most terms in a commercial financing agreement will range from 24 months, all the way up to 6 months, usually separated by 12 month increments. The length of your term for your commercial financing agreement will be determined by the commercial financing company during the review of your initial application and you will be notified of your term when you receive your notice of approval. Another commonly used phrase that you should understand is “funding conditions.” These refer to the documentation needed in order to wrap up your commercial financing transaction and to fund your deal so that you may take possession of your equipment. It is also important that you read and thoroughly understand your financial agreement documents. Here are a few words and definitions that you will run across while reading your agreement. Depreciation: A reduction in the value of an asset with the passage of time, due in particular to wear and tear. Decrease in the value of a currency relative to other currencies. Loan: money lent at interest Lease: a contract by which one conveys real estate, equipment, or facilities for a specified term and for a specified rent; also :the act of such conveyance or the term for which it is made Lessor: one that conveys property by lease Lessee: one that holds real or personal property under a lease Prepayment: payment in advance Prepayment penalty: a fee incurred when payment is made in advance These are just a few of the common terms that you will run across while reading your commercial truck financing agreement. Please be sure to note any questions that you may have and immediately direct them to your representative at the commercial finance company. You should be in full understanding of all of the term and conditions of your agreement prior to signing the contract. Candy William is a professional blogger and article writer who is sharing his knowledge and information from past 7 years on financing heavy equipment and trailer financing. In his free time he loves to hang out with his wife and children.
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