Business Car Loan - Business Car Loan

Business or Commercial car loans are those extended to businesses for the purchase of a vehicle that is used for business purposes. Some lenders also consider loans extended to individuals for the purchase of a commercial vehicle (such as a heavy-duty pickup or a cargo van) to be a business car loan. Business vehicle loans are normally used to purchase new vehicles, but pre-owned business financing is also available from different lenders.In order for a business to qualify for a commercial car loan, it must have verifiable credit and annual revenue.

Although the level to which credit must be established varies, businesses with short credit histories or short lengths of time in business may require a personal guarantor, who is an officer of the company who wishes to have his or her personal credit considered for purposes of loan approval. If annual revenue is below $100,000, a personal guarantor may also be required. Note that lenders have varying requirements, and some will require annual revenues in excess of $1,000,000.If you are looking for tax deductions, you may want to consider securing a business car loan. Since purchasing a vehicle for your company is a business expense, it offers a major tax advantage. However, before you go to your local bank, there are a few things you should understand when you apply for a business car loan.

Business Car Loan Proposal

Developing a loan proposal is the initial step to secure a business car loan. The loan proposal is the portfolio/document that sells a business to an institution or lender. The proposal should document why the lender should give you a loan. A well-written business proposal explains who you are and what your business is like.It also answers the following questions:

Why are you requesting a business car loan?
How much money is needed?
How will you repay the loan?
How much collateral do you have to back the loan?
What is your current and projected financial status?

For commercial loans, lenders analyze both personal and business financial statements.

Research Loans, Rates, and Credit History

Researching your options is the first step in getting a business car loan. Know your personal and business credit scores before approaching the bank or any other financial institution. Find out which lenders will offer the best commercial auto loan rates. Call the lenders or check online to see if you meet their minimum requirements as you do not want too many inquiries on your credit report. Keep in mind that several inquiries in a short period of time can reduce your credit score.

Determine What is Needed to Secure a Business Car Loan

Deciding how to secure the loan is the third step. You have two options; however, the one you choose depends on how long your business has been established and your business loan credit score.The best option is to secure the loan with your business’ credit because car loan rates with commercial loans are usually much lower than personal loan rates. It is important to maintain a good business credit score and a good personal credit score. Some lenders require that everyone who owns more than a certain percentage (usually 20%) in a business to have good personal credit.

If your business is well established and already has a good line of credit, you can secure the loan with the business. Conversely, if your business has no established line of credit, you may be required to secure the loan with a personal guaranty stating that you will personally repay the business’ debts if it defaults on the loan. While this is an excellent way for you to establish and build a line of credit for your business, your personal assets could be seized you are unable to make loan payments.

Securing a business car loan can be relatively simple if you are prepared before you request any type of funding. In addition, it will provide an excellent tax incentive for your business. For a loan to be approved and an auto vehicle to be titled in a business name, the car or truck must be used for the day-to-day operations of the commercial business. To clarify requirements in your state or the financing regulations offered by individual lenders, contact your lender or a local dealership's finance department.

Biphoo

29 Sep 2017

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