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Compare taxi loans
Looking to own a taxi company? Find out what finance options are available to you.
To own a taxi company requires some upfront cash. There are several costs you need to consider, and one of the main ones is taxi medallions. If you don’t have the finance available to purchase a taxi medallion outright, you can consider a taxi loan. These are business loans that can help you establish your taxi business and get your drivers on the road.
How can I finance a taxi company?
You have a few options to consider if you’re looking for a taxi loan:
- Unsecured business loan. Some lenders offer business loans that are available to finance establishing a taxi company. These loans can be unsecured and cover the entire cost of purchasing the licenses.
- Secured business loan. Some lenders may be willing to let you use an asset, such as property, as security.
- Taxi finance from a specialized lender. Several specialized lenders operate in the taxi lending space. You can generally choose from commercial loans or standard business loans. As these are offered by specialist providers, you may find features that benefit you as a taxi company owner.
- Loan broker. If you don’t want to find the loan yourself, you can use the services of a loan broker. These brokers can help you find the right taxi loan for you.
Compare business loans
How can I find the right loan for my business?
As there are a few loan options available, it’s important to compare them to find the right loan for you. Here’s what to keep in mind:
- How much can you borrow? Taxi licenses and medallions can be expensive and you want to be sure you can borrow as much as you need to get your drivers on the road. Some lenders may only finance a percentage of the medallion cost or require a deposit, so check this before you apply.
- Is the loan secured? Some lenders will not accept taxi licenses or medallions as security, but you may be able to offer personal property or vehicles you own as security for the loan. If you don’t hold any high-value assets, you may need to opt for an unsecured loan.
- What are the repayment terms? How long do you have to repay the loan? When and how do you make repayments? Can you repay the loan early without penalty? These are all important points to consider.
- Who is the lender? There are several specialist lenders operating in this space, and you need to make sure they are reputable before you apply for a loan from them.
- What can you use the funds to do? You may want to use this loan for other taxi-related purposes, like improving the vehicles. Are you able to finance those kinds of improvements? Can you purchase a new or used vehicle, privately or from a dealership?
- Are you eligible? The different taxi finance options all come with varying eligibility criteria. Make sure you’re eligible before you apply.
How much does it cost to finance a taxi business?
Taxi businesses don’t come cheap, but they can be lucrative. Costs vary depending on the taxi license required, the vehicle(s) you’re purchasing and the state you reside in. Keep in mind that you may have additional costs associated with the business such as insurance, office space and phone lines.
Do I need a medallion?
You might. Some cities require you to have a medallion to operate a taxi business in certain cities, including New York, Boston, Chicago, San Francisco and Miami. Those who own taxi medallions usually aren’t taxi drivers themselves but instead lease taxi cabs to licensed drivers on a daily or weekly basis.
It wasn’t long ago that taxi medallions sold for over $1 million. Taxi businesses can be very profitable in busy cities like New York and Chicago. With the recent rise in popularity of ride sharing services like Uber and Lyft, traditional taxi cab businesses have seen a dip in customers. Though, they still provide a needed service in these busy cities.
In 2017, taxi medallions are generally selling for under $1 million, with some prices as low as $300,000.
How much can I make with Uber?
Uber drivers end up making just $9.21 an hour after fees, vehicle expenses, taxes and a benefits package — according to a 2018 study from the Economic Policy Institute. Keep in mind that driving during busier hours like Saturday nights may make you more money than driving during slower hours when not many people are requesting rides and no surge prices apply.
If you’re interested in becoming an Uber driver, working out your income — minus expenses — will help you make your decision. You’ll also need to factor in things like hours flexibility and wear and tear on your car to see a total picture. Don’t yet have a car? Check out our page on getting a car to drive for Uber to learn about your options.
3 factors to consider before getting a loan
Before you apply for a loan to finance a taxi business, be sure to consider the following:
- Will you need collateral for the loan? Some lenders require an asset to secure the loan, and not many use taxi medallions as security due to volatile pricing and changes in regulation. Make sure you understand whether you’ll need to secure the loan and if you have an asset that can be used as security.
- Do you need to make a deposit? Some lenders offering taxi loans may not cover all the costs or will require a deposit to approve the loan.
- Have you got the legalities sorted out? Before you start a taxi business, there will be legalities to consider which will vary by state. You may need a taxi medallion to operate taxis in certain areas. You’ll need insurance for the vehicles you operate. And your drivers will need taxi licenses.
- What’s the estimated monthly income? Having an idea of how much you can bring in is essential to getting approved for a loan. Lenders need to know you’re able to afford the repayments.
Beware of predatory taxi loans
With medallion prices soaring in some cities, an increasing number of drivers are taking out loans they can’t afford to repay. Some of these loans also came with seemingly-attractive features like interest-only repayments that only served to increase the cost and keep drivers in debt for longer. Many end up filing for bankruptcy because they weren’t able to make their repayments. Consider all sources of financing before you borrow and make sure your future income estimates leave room for an unexpected dip in revenue.
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