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August 04, 2021

Taxi Loans: How to Get a Loan for Your Taxi Business

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Fora Financial

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Taxi business financing can help you throw that door wide open. Among other things, taxi loans enable business owners to:
  • Purchase more taxis
  • Hire more drivers
  • Expand service areas
  • Upgrade or maintain equipment
  • Fund advertising campaigns
Of course, obtaining taxi business financing can be complicated, especially if you’re not familiar with the process. To help you overcome that initial hurdle, this post will outline how you can get a loan for your taxi business.

Before You Shop for a Loan

When it comes to financing your taxi business, it’s easy to be overwhelmed by the number of options available. So before you even look for a loan, take the time to determine:
  1. Your ideal loan amount
  2. The maximum monthly payment you can afford
  3. The down payment you can afford
As a rule of thumb, you generally want to keep your debt-to-income (DTI) ratio to 36 percent or below. Using a loan calculator, you can find the loan amount, term, and interest rate that enables you to keep your DTI at 36 percent. Once you’ve determined these criteria, you can easily filter out the loans and lenders that can’t meet your needs. Though it’ll take time to determine these criteria, you’ll save more than enough time in the long run to make up for it.

Prepare Documentation for The Loan Application Process

In most cases, during the loan application process, you’ll need to submit:
  • A business plan
  • Personal and business tax returns
  • Business bank statements
  • A balance sheet
  • Income statements
  • Business licenses
  • Personal and business credit reports
If you have all these documents collected and organized, the loan application process will go much smoother. Plus, it’ll show potential lenders that you’re serious and conscientious. Also, for most loans, your personal credit score will be a key factor in your approval decision. In fact, many lenders have a minimum credit score that they require all applicants to have. So if you know your credit score doesn’t meet a lender’s threshold, you can skip their application process and save time.

Select Your Business Financing Lender and Apply

1. Research your lender and loan options

Once you’ve determined your credit score, the ideal size and the cost of your loan, you can start shopping for lenders. As you browse, look for policies—such as minimum credit score or maximum loan amounts—that are non-starters. This will help you quickly weed out business financing options that aren’t viable. After you’ve collected several lender options, do some research on them. Read their reviews and look them up on the Better Business Bureau (BBB). Also, find out if they have experience with taxi business financing. The ideal lender is reputable with a great track record and experience in your industry. New call-to-action

2. Choose a lender (or lenders) and apply

After compiling several lender options, it’s time to select one or more with which to apply. If you choose more than one, make sure you apply to all lenders around the same time. This will help minimize the impact on your credit score. Many lenders will have you fill out your taxi loan application online, though others may require an in-person visit. In either case, it’s a good idea to ask a few questions before you apply, such as:
  • Are there any restrictions on fund usage?
  • How long does it take for the funds to be released to your taxi company?
  • Is business loan prepayment allowed?
In addition, there may be other questions to ask your small business loan lender before starting the funding process. Also, if you’re considering a Small Business Administration (SBA) loan, you can contact your local branch with questions.

3. Evaluate lender offers and accept

Assuming your application is approved, you’ll receive a loan offer. This loan offer will contain all the details you need to determine the exact cost of the loan. Therefore, you should look over it carefully and make sure everything is in order. If you have any questions, ask your lender before accepting the offer. Then, once your questions are answered and you’re satisfied, you can sign and accept the offer. After that, you will receive your funds, usually via direct deposit.

A Note on Obtaining a Taxi Loan with Bad Credit

If you don’t have good credit, obtaining traditional taxi business financing is going to be difficult. That said, there are alternative financing options, such as a merchant cash advance, that don’t require an excellent credit score. Also, taxi loans from online lenders are typically less stringent with their credit score requirements. Ideally, though, you should work on improving your credit score before you apply for a loan. That way, you’ll have an easier time getting approved and you can access the best interest rates. To improve your credit score, you should:
  • Pay your bills in full and on time.
  • Keep your credit utilization ratio low.
  • Dispute any errors or inaccuracies on your credit report.
It may also help to read about how FICO scores are calculated.

Conclusion: Capitalize on Your Taxi Business Financing

Making it through the process of obtaining taxi business loans is cause for celebration. Still, your work is far from over; your next task in the taxi financing process is to create enough value to cover the cost of your taxi loan and generate a profit. How you do that may vary; for example, you could expand your service area, add new vehicles to your fleet, or spend more on marketing. Whichever path you choose requires careful planning and smart strategy. To help you prepare, we’ve compiled a few resources that’ll help you decide how to spend your additional working capital: