A business vehicle could prove useful for the day to day running of your business operations. However, you might not be able to afford a business vehicle just yet and would be needing a means of financing. For the success of your business, it’s crucial that you properly consider your options.

Do You Need Business Vehicle Finance?

Several advantages come with business vehicle finance. They include:

  • Flexible payment structure
  • Little or no collateral requirement 
  • Tax benefits

Requirements for a Business Vehicle Finance

You need to have your documents sorted out before seeking a business vehicle finance to save time and energy. Although these requirements vary slightly from state to state, general requirements include:

  • Identification paper
  • Business budget and financial records
  • Proof of business ownership
  • Insurance proof
  • Your financial records

Available Finance Options

There are various business vehicle finance options available for you. They include:

Chattel Mortgage

Car Chattel Mortgage loan process is quite straightforward. The lender loans out the fund needed to purchase the business vehicle to you. Then, the lender places a mortgage on it till you can complete the payment for the loan.

Business Loans

Businesses can finance the purchase of their business vehicle by applying for the conventional business loan, which usually has more flexibility than Chattel Mortgages as you can choose whether you want a secured loan or an unsecured loan. You can also use the money to cover some other expenses for the business. 

Commercial Hire Purchase

An Offer to Hire or a Commercial Hire Purchase is when the institution financing the loan retains ownership of the business vehicle until the borrower can make full payment for the ship by paying a regular instalment over a fixed time.

Choosing the Right Lending Company

It’s vital to choose the right lender for your business vehicle finance. To ensure you can do this, here are the following guidelines put in place by the Australian Securities and Investment Commission (ASIC).

  • Your Lender Must Be Licensed: It’s one of ASIC’s guidelines that before a lender gives out money, it must have a license. So, before you make a pick, ensure that the actual lender has a license. To know this, you can check up your prospective lender in the list of ASIC’s licensed lenders in the ASIC’s Connect Professional Register.
  • Your Lender Must Provide You with The Credit Guide: As a licensed lender, it must provide you with the credit guide and credit proposal disclosure document, so you can read and make informed choices.
  • Your Lender Must Give You A Quote for Providing Credit Assistance: Unless you have agreed on the maximum amount, you will pay for your lender’s services.

Improving Your Credit Profile

If you’re looking to improve your credit profile, here are few tips as provided by ASIC.

Examine Your Credit Report and Score

The first thing you want to do is ensure there is no error or irregularity in your credit report before you apply for a loan. If you discover any error or inconsistency that could negatively affect your credit score, you can hire a credit reporter to fix it for you.

Discharge All or Some of Your Debt Obligations

Securing equipment finance is pretty much about the history of your past credit loans. If you have mismanaged or delayed in its payment, it could negatively affect your credit profile. Pay your bills on time, resist accruing debts and ensure your existing loan obligations are on track.

Make A Comprehensive Budget

You don’t want to take more than you can payback. If you do, it will affect your next loan application. So, make a detailed budget about your expenses and income for the time being. This would allow you to be prudent in your financial dealing.

Barriers to Enquires About Your Credit Profile

This is important if your lender decides to consider your credit report, you don’t want to make it difficult for them, do you? So, watch out for any barrier.

How to Apply for A Business Vehicle Finance

Applying for a Business Vehicle Finance is straightforward. You can compare the interest rate of available Business Vehicle Finance from various lenders/leasers and choose the option that works best for your business. You can complete the application form from the website of the lender and wait for the approval.

To be eligible for Business Vehicle Finance, you should be at least 18 years old. Some lenders provide loans for only those who are resident in Australia or citizens. 

Avoid going above what you can afford to repay so your business does not incur debt and lose assets. Ensure you calculate how much you can lend with loan calculator from a reputable website.

You can calculate the depreciation on the vehicle using

  • Asset’s cost × (days held/365) × (100%/asset’s effective life)

You can obtain the diminishing value depreciation using:

  • Base value × (days held/365) × (200%/asset’s effective life).

DISCLAIMER: The data provided above is merely a GENERAL MATERIAL for your use and consideration. They do not, and should not in any way, be considered as financial advice or recommendation from CSHTA. Hence, we shall and do not take liability for faults or mistakes in the presentation or interpretation of the facts highlighted herein. Also, we do not accept responsibility for any analysis and commentary on data present within the public domain. We advise you to consult with an accountant or financial advisor if you need specific recommendations concerning your financial needs or circumstances.