If you are in need of a company car for your business, there are options aside from paying out of your own pocket. Transport finance is an option you should explore when considering a company car or transport for your staff. It may seem a daunting prospect but outlined below are the steps you need to take in order to apply for transport finance.
What is transport finance?
If you are wondering “What is transport finance?” this is the simple explanation: transport finance is a type of loan that is offered for companies who need to finance a company car or a fleet of vehicles.
Vehicle asset finance or transport finance is often offered by banks or financial institutions that have partnered with logistics companies or car dealerships. Often the loans are structured differently to normal vehicle finance with interest rates that differ to vehicle loans.
Gather important information
Before you apply for transport finance, you will need to have the correct documentation and information ready. Outlined below are the requirements for a transport finance application.
- Company registration and VAT number
- Banking details and balance sheet information
- Contact information including registered address
- Director/member/trustee details
- Details of the asset you wish to finance
- Identification documents of director/member/trustee
Once you have gathered the information necessary, you will need to submit it to your chosen financial institution.
Check your credit history
Checking your credit history before sending in an application will allow you to be prepared for any questions that may arise from the bank. You will need to check your own personal credit history and the credit history of your company, as this is what the bank will be looking at.
You can check your credit at the credit bureau or online for free. A good corporate credit rating can lower your risk profile for the banks, as will a good personal credit rating. If you find any discrepancies on these credit history reports, be sure to contact the relevant bureaus and ask them to correct the information accordingly.
Decide between secured or unsecured
A secured loan means that you will provide the bank or financial institution with collateral when applying for the transport finance. It also means that the lender owns the vehicle until you have completed all the repayments on the loan.
An unsecured loan means that you do not supply the bank with collateral, which can cause you to be seen as a high-risk client. Unsecured loans allow you to own the vehicle outright at the date of purchase, but can come with higher interest rates.
Calculate your affordability
Calculating your affordability for transport finance can be done using online calculators provided by banks or financial institutions. It is a simple process but can help you discover what you are able to spend monthly on vehicle finance, especially if you are an SME.
Knowing your affordability will allow you to choose from vehicles that you and your company can actually afford and will help with your loan application. Being prepared before heading to the bank will show the bank that you are dedicated to your task and will reflect positively on you and your business.
Prepare a loan proposal
Because you are looking into transport for a company car, you will need to prepare a loan proposal. This is because it will be viewed as an asset rather than a personal vehicle. The proposal should detail why you need the vehicle, how your business will use the vehicle and what your business does.
You will also need to include how much you want to borrow, the amount you have for a down payment and any details about any collateral you have to offer. Including extra information about your marketing strategy and overall business performance is also a good idea so the bank can get a better picture of who they will be lending to.
Make a list of commercial lenders
Before you apply anywhere, you should make a list of commercial lenders and compare them based on the rates and terms they offer. Many business lenders provide minimum and maximum amounts, and it is important to know these before making any final decisions.
Narrow this list of lenders down to a top five or top three, and call them to find out their requirement in terms of credit and business history. You will want to choose a lender that is likely to accept your credit score and business history and provide you with the best rates and terms. If your top five or top three do not meet this criteria, continue down your list until you find someone who does.
A company car can be a significant improvement to any business with employees who need to travel for work. It will allow them to save money on petrol and wear and tear on their own car. It is also a good advertising platform for small businesses or companies involved in transporting goods. However, you will need to be sure your business can afford this asset so be sure to use an online calculator or speak to a financial expert.