Auto financing for your business is a difficult thing to achieve if you have only been in business two years or less. Lenders will require a personal guaranty behind the loan. However, if the business has been active for more than two years, you can finance it under your business.
1. Logistics is the Key to Success
Almost every business needs transportation in some way. Owning your logistical supply chain will improve your bottom line and free up additional funds for your business. Business auto financing is a good way to lower your upfront investment by creating control over the supply chain.
2. Monthly Expense Over Full Upfront Cost
Cash flow is an important aspect of any business. However, many businesses struggle with expanding and financing. If your business involves vehicles such as a limo service or fleet vehicles, then it becomes difficult to expand rapidly enough if you want to pay cash up front. If keeping up with growth is a major factor then auto financing multiple vehicles is a better solution than paying for one or two with cash reserves.
3. Save on Taxes
A small piece of the puzzle is a business’s tax write off. Business auto financing allows an increase in monthly expenses as you pay off the investment. However, keeping total profits lower, especially for entities set up as a C Corp, is important for keeping tax payoffs low.
4. Custom Business Add-ons Like Cranes or Up Fitting
If a business is a specialty company or needs specialized add-ons, such as adding a crane or up fitting work vans, it can greatly add to the cost of the vehicles, making it very difficult to pay outright. Even retro fitting minivans for wheelchair accessibility is very expensive.
5. Other Business Auto Financing Options
Another option if you regularly purchase vehicles is to get a business line of credit. Often, the rate is better for a line of credit. However, business lines of credit are harder to qualify for and need more stipulations to set up. The bonus is you only qualify once and can use the line as you see fit. This includes avoiding business auto financing and using the line to pay for vehicles or any other business need you want to use it for.
6. Building Business Credit
If your business is newer and you do not have much in the way of credit under the company name, then business auto financing is a great way to build credit under your business’ name. A paid off vehicle will do wonders for establishing your business’ credit.
7. Buy or Lease Vehicles
You should weigh both sides when deciding whether to purchase or lease a vehicle for your business. One primary thing to consider is the use of the vehicle. If you predict a lot of wear and tear, then purchasing might be a better option. If you decided to lease, you might quickly violate some of the strict terms most leases entail. Additionally, purchasing allows you to speed up the depreciation of the vehicle as a tax write off. Leasing will not allow you to do this.