7 things to know before applying for a business car loan
Understanding business car loans can be a little tricky, however, there are a few things you should know before applying for one.
A business car loan lets you buy a vehicle for your business with money loaned to you. Like any loan you may have, you'll be required to pay the loan amount back on a regular basis — usually monthly over a fixed period of time (the term of the loan).
There are a few options when it comes to getting a business vehicle loan including a goods loan (chattel mortgage), finance lease or hire purchase.
In this article, when we refer to a business car loan we’re talking about a goods loan (sometimes referred to as a chattel mortgage) – as this is the most popular type of business car loan.
A balloon payment is an amount due at the end of your loan. Balloon payments are usually a percentage of the total loan amount.
While not all business car loans will have a balloon payment, they are a popular option.
Balloon payments can be helpful if you need to reduce your loan repayments, making your regular repayments lower. This helps you get the vehicles your business needs without tying up cashflow.
While it does make your repayments lower, you’ll be left with a lump sum remaining.
This means your loan won't be fully paid off by your monthly repayments - as you’ll still need to pay the lump sum leftover to close out the loan.
Business assets may be eligible for the government’s instant asset write-off and temporary full expensing which allows eligible business owners to claim an immediate tax deduction for eligible asset purchases. Find out more about eligibility, requirements and exclusions on the ATO website. We also have an article on how instant asset write-offs could help Australian businesses.
If you’re planning on applying for business car finance soon, improve your future borrowing potential by taking some basic steps today.
This provides a clear understanding of your business income and whether you can afford the monthly repayments for the amount you want to borrow. Don’t forget to consider your cashflow.
Have an existing business loan? Make sure you don’t overdraw your account. Try to make extra repayments consistently if you can.
Credit activity (personal and business) is kept on file by credit agencies for 5 years. This includes your loan details, repayments, overdue accounts. We use this information to assess whether you’re credit worthy so it’s important to maintain a good history.
When you apply for a business car loan, you’ll be asked for a few documents.
Some examples of what you’ll need to provide include:
While a bad credit history is likely to decrease your chances of getting a loan, it doesn’t mean you can’t get a loan at all.
Get in touch with one of our business loan specialists to find out how we can help you.
This information is general in nature and has been prepared without taking your objectives, needs and overall financial situation into account. For this reason, you should consider the appropriateness of the information to your own circumstances and, if necessary, seek professional advice.
The taxation position described is a general statement and should only be used as a guide. It does not constitute tax advice and is based on current tax laws and their interpretation. Customers must seek their own independent tax advice in relation to their individual circumstances.