Need to purchase a car for your business but don’t know how to finance it? Don’t fret! There are plenty of great business car loans for you to choose from.
To make the business car finance process easier, we’ve detailed everything you need to know when applying for a business car loan. Read on so you can start your business car loan journey as soon as possible.
Business car loan vs Personal car loan
First, let's discuss the difference between business car loans and personal car loans. Usually, business car loans, also known as commercial car loans, offer lower interest rates and come with more flexible loan structures. Business car loans also offer a range of tax benefits such as:
- Ability to claim interest on the loan as tax deductible.
- Asset tax write-off for the vehicle purchased.
- Claim GST on the full purchase price of the vehicle on your taxes.
- Claim vehicle depreciation on your taxes.
- Claim the kilometres, fuel used, registration, and insurance on your taxes.
If you’re going to buy a car for your business, it may be wise to use a business car loan instead of a personal loan as it comes with heaps of advantages. With a business car loan, you can purchase a single car, a van, a truck, a fleet, or commercial equipment too!
What loan terms are available for business car loans?
Business car loans can have terms ranging from one to seven years. The loan term may be subject to change depending on how much you’ll be borrowing.
If you’re purchasing a fleet of vehicles or expensive commercial equipment, the loan term may be longer. On the other hand, if you’re purchasing a relatively cheap vehicle, the loan term could be shorter.
When looking for a business car loan, make sure to speak with a lending specialist. Discuss your needs and see what the best loan term option is for you and your business. Arrange a call with us at carloans.com.au, and we’ll help you with your business car loan needs.
Do business car loans have balloon payments?
You may add a balloon payment on your business car loan depending on what the lender agrees to. With a balloon payment, a percentage of the total loan amount will be paid as a lump sum at the end of the loan term. This works to lower the monthly repayments and helps make them more manageable.
If you’re concerned about freeing up more cash flow, adding a balloon payment to your business car loan may be beneficial. However, the loan will not be considered completely paid off until the balloon payment is made.
Calculate the possible repayments with and without a balloon payment to see which option best fits your business’s financial needs.
Requirements for a business car loan application
If you’re an individual who wants to apply for a business car loan, you must:
- Be 18 years old or older
- Be eligible to work in Australia
- Be a sole trader, sole owner of a company, or
- Be authorised personnel applying for finance and credit for a business
If you're a business that wants to apply for a business car loan, you must:
- Have a current Australian business number (ABN) registered for at least two years
- Be active or trading for over 12 months
- Have a good credit rating
- Not be in the process of bankruptcy
- Have business financial statements from the last two years
- Have tax return statements from the last two years
Documents you need when applying for a business car loan
Applying for a business car loan doesn’t have to be complicated. Prepare these documents when you start your business car loan application:
- Identification (e.g., driver’s licence and other business paperwork)
- Business plan
- Cash flow projection
- Tax statements
- Proof of ownership of the business
- Business Activity Statement (BAS)
- Financial statements of the business
- Personal finances
Make sure you have these ready, so you don’t delay your business car loan application. Talk to your lender if there are any additional requirements, as well.
Can I get a business car loan with bad credit?
Yes, it’s possible to get a business car loan with a poor credit score. However, it may be more difficult, and the requirements may be more stringent. Also, some lenders may offer higher interest rates to those with bad credit compared to those with good credit.
For the best results, ensure that your credit score is at its best. Improve your credit score by paying bills on time, reducing debt, building your savings, and checking your credit history for any errors. With time, you can improve your credit score and apply for a business car loan with more ease.