Car Loans for Small Business

Car Loans for Small Business

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Before you apply for a small business car loan

When you take out a car loan for your business vehicle, you want to ensure that you're adding an asset to your business, rather than a liability. This means choosing the right car loan and the right car to keep your business running. You'll need to consider:

1. Interest rates

Different types of small business car loans will attract different interest rates. As a general rule, when you provide security for a loan, you'll pay less interest. Taking out a shorter loan term also reduces the total interest you will pay.

2. Repayment options

Payments on your car loan need to fit with your cash flow. If you need a seasonal payment structure, mention this to your lending manager before you apply for the loan.

3. Minimum loan amount

Some lenders have a minimum loan amount, and the car that you are buying will need to be less than 10 years old at the end of the loan term.

4. Fees and charges

Additional costs for the loan include account fees and application fees. The comparison rate can help you to compare the full costs of different loans more accurately.

5. Loan restrictions

When you take out a small business car loan, you must use the funds to buy a car. Depending on the loan type that you choose, there may be requirements for how much the car is used for business purposes.

6. Security

Using the car you purchase or other business assets as security for the loan can reduce the interest on the loan.

7. How will you use the car?

The amount of personal and business use for the vehicle affects your choice of a small business car loan.

8. Your loan eligibility:

When you need a car loan, there are some criteria that you need to meet to be eligible with certain lenders. These include:

  • Age of the business - most lenders require at least one year in operation, but there are niche lenders who provide start-up finance.
  • Turnover - you need to meet lender criteria and demonstrate the capacity to repay the car loan.
  • Credit profile - personal credit histories of directors, as well as the company's credit report, affect the ability to acquire a car loan.
  • ABN/ACN - you will need to have a registered ABN or ACN.
  • Demonstrate how the vehicle will be used in the business
  • Stable company structure

Using a business car loan broker can help with the application process, as you will have a lending manager complete a detailed assessment of your business needs and finances before you select and apply for a loan.

Car Loans for Small Business

The best option for your small business car loan will depend on all of the considerations above. Be sure to consult your account or financial advisor before signing a loan contract.

Here's some of the most common small business car loan options:

Chattel Mortgage

Perfect for a car that is used more than 50% of the time for the business, with a chattel mortgage the business owns the vehicle at the end of the loan term.

You will often have a balloon payment at the end of the loan, and providing a deposit can reduce your interest rates.

Low Doc Car Loans

If your business has minimal financials, you are a sole trader or owner, then you can apply for a car loan based on some basic financial information including previous tax returns.

Novated lease

This loan is best when you intend to provide a car as a benefit to employees. The car and car loan stay with the employee when they leave. The car can be used totally for personal use, or some business use of the vehicle can be included in the novated lease arrangement.

Bad Credit

If your company or company directors have a compromised credit report, it doesn't exclude you from taking out a small business car loan. Plus, you get some breathing space while you build your business credit back.

Which business car loan is best?

The car loan you choose will ultimately depend on what you need the car for within your enterprise. Once you've identified how the car will be used, then you're ready to have a financial assessment and get recommendations for the best business car loan.

Getting business car loan advice

When taking out a new car loan for your business, make sure that the vehicle will meet all of your business needs, and speak to your accountant about the ideal loan structure.

Once you're ready, the next step is to get some small business car loan quotes from a specialist in small business lending, and you're on the way to getting the car you need to run your business more effectively.

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