If your business operates by distributing products and services, you must rely on dependable transportation to run your company. Perhaps you are considering applying for an auto loan to update your current transportation operations or investing for the first time to launch your business. Applying for a business auto loan can get a little confusing so here are a few things you should know.
Business Auto Loans Are Different From Equipment Loans
While business auto loans and equipment loans share similarities in the loan application process, there are important differences between the two that you need to understand. Unlike equipment loans where you have the freedom to directly purchase your equipment, with business auto loans the bank handles the vehicle purchase for you. After you decide on the specific vehicle you want, the bank will directly pay the dealership for your business vehicle. In exchange for the lender paying for your vehicle, you repay the loan to the bank with interest. This also applies to specialty and commercial vehicles if your business needs to operate or expand its transportation inventory. It is important to research different auto loan options for your business to evaluate the specific needs of your company.
The Underwriting Team Controls Everything
The underwriting team has credit ratio down to a science. The sole purpose of the underwriting team is evaluating your company’s financial reputation and accepting liability that will guarantee the bank the return of its money. After submitting your business auto loan application, the underwriting team will take over to calculate three things about your company’s revenue: what goes in, what comes out, and what is left over. Then, they make further assessments to determine an interest rate and the length period of payments to secure the bank’s assets before finally approving the loan. The underwriting teams play a significant role in determining your line of credit so it is important to understand exactly what lenders are evaluating when you request a business auto loan.
Banks Do Not Like Offering Business Auto Loans
For good reasons too. Banks do not want to get stuck with a vehicle that is not resellable. Many banks refuse to offer business auto loans because they are just too big of a risk. It all boils down a vehicle’s collateral due to rapid depreciation as soon as the car exits the dealership’s parking lot. Banks do not like risking the possibility of a client defaulting on a vehicle and the hassle of repossessing a car. However not all banks are the same which means there are banks which offer business auto loans and there are banks that do not. A simple search will lead you in the right direction in which lenders provide financing in business auto loans.
Applying For A Business Auto Loan Is Surprisingly Easy
With a typical 24-48 hour application turn around it is no wonder applying for a business auto loan is a breeze. Most of your time is spent shopping around for banks offering the best rates and rate guidelines. To apply you will need:
- Good Credit Score
- Credit History
- Business ID
- Business Name & Address
- Annual Sales Reports
- Personal & Business Tax Returns
- Financial Statements
- Type of Business & Year Established
- Business Owner Name, SSN, ID & Address
- Business Owner Title & Company Ownership
Once you submit this information along with your application, the underwriting team will take over to adjust the total loan amount, interest rate and payment period. The bank will contact you with any questions or request documents if there is any missing paperwork. Applying for a business auto loan is also easy if you are a brand new business with credit. The bank will assess your individual credit affiliated with your business, assess risks and gauge owner and business affordability.
With this information you now have the power to choose the best business auto loan option for your unique company. Whichever lender you decide on, they want to ensure you carry a strong proof of income and good credit score.