If you’re in the market for a business auto loan, you have lots of options. You can go with a traditional lender, or explore alternative lenders. In this article, we’ll discuss 7 loan options to consider if you’re looking to purchase commercial vehicles or specialty vehicles.
What Is a Business Auto Loan?
Business auto loans, like commercial truck loans, are small business loans that are typically used by businesses that need vehicles for work-related purposes, such as sales representatives or delivery drivers.
However, auto small business loans are generally more expensive than consumer loans. This is because a consumer auto loan is less risky for the lender.
How Does a Business Owner Finance a Car?
If you’re a business owner looking to finance a car, there are a few things you need to do to make sure you get the best possible deal.
- Get approved: First, you’ll need to get credit approval from a lender. This will help you determine how much money you’re eligible to borrow.
- Find a lender: You’ll need to find a commercial vehicle financing company that offers competitive rates. Shop around and compare offers from commercial auto loan lenders before you decide on a lender.
- Monthly payments: Once you’ve found a lender, you’ll need to calculate your monthly payment. This will help you budget for your loan and make sure you can afford the payments.
- Get a loan: Once you’ve found a lender, you’ll need to apply for a business auto loan. Be sure to have all of your financial documentation in order, such as your tax returns and business financial statements.
How Do Business Auto Loans Work?
This type of business loan is secured by the vehicle, which means that if you default on the loan, the lender can repossess the vehicle. Commercial auto loans typically have lower interest rates than personal auto loans, and they may also come with additional perks, such as flexible repayment terms.
To qualify for a business auto loan, you will usually need to have a good credit score and a strong business financial history.
Best Lenders for Commercial Auto Loans
Let’s take a look at the following list of business auto loan providers and find the right one for your specific needs:
1. Bank of America
Bank of America offers car loans to customers who want to buy or refinance cars. Interest rates start at 3.99%, and small business loan amounts start at $10,000. The loans can be used to buy or refinance cars, light commercial trucks, or vans. The repayment term is four to six years, and the business vehicle age limit is up to 5 years old with a mileage limit of up to 75,000 miles. There’s no specific minimum credit score and no minimum time in business requirements.
2. Wells Fargo
Wells Fargo is a trusted lender with a variety of loan products available. Their starting APR is 6.25%, and they do not charge an origination or maintenance fee. There is also no prepayment penalty or termination fee, and the only additional fee is a $150 documentation fee. Loan amounts range from $10,000 to $100,000, and repayment terms go up to 84 months.
3. Capital One
If you’re in need of a business loan, Capital One is a great option. They offer loans starting at $10,000 with loan terms of repayment of up to five years. To qualify, you must have or be willing to open a Capital One business checking account and your business must have been operational for at least two years.
4. Balboa Capital
If you’re a small business owner in need of some quick cash, Balboa Capital may be the lender for you. This alternative lender specializes in equipment financing and offers same-day financing for loans of up to $500,000. You’ll need to have been in business for at least one year and bring in at least $100,000 in annual revenue to qualify, and your personal FICO score should be 620+.
5. Ally Bank
Ally Bank is a great option for financing your car lease. They offer flexible leases with no personal guarantees, and they have specific loans available for heavy-duty trucks and vehicle modifications. Also, they offer financing only in the name of the business, so you may not be liable for any nonpayment of the loan.
6. National Funding
National Funding is a great option for startups and businesses with bad credit. They offer to finance up to $150,000, and the eligibility criteria are less strict than with other lenders. You only need to be in business for six months and have a FICO score of 575.
7. Crest Capital
If you need a business loan in a hurry, Crest Capital is one of the best options around. They can fund loans up to $1 million within and if you borrow $250,000 or less, you could have the money in your account within 4 hours. The loan terms are also very flexible, ranging from 24 to 72 months. However, one downside is that a personal guarantee is required for all loans.
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Should You Buy or Lease a Car for Your Business?
It depends. If you only need the car for a short period of time, or if you expect to use it infrequently, a business auto lease may be the better option. Leasing may also be a good option for business owners who need a high-end or luxury vehicle that they couldn’t otherwise afford to purchase outright. However, if you anticipate putting a lot of miles on the car or if you plan to keep it for several years, buying may be the better choice.
Which Bank is Best for Commercial Auto Loan Finance?
Bank of America is a great choice overall mainly because of its low APR and easy-to-meet commercial auto loan qualifications. Remember though that to get the best possible deal on a business car loan, it’s important to compare offers from multiple lenders and choose the one that best suits your business needs.
Do Business Auto Loans Show Up on a Personal Credit Report?
No, business auto loans do not show up on your personal credit report and won’t affect your personal credit score. However, if you default on the loan, the lender may repo the vehicle and this will show up on your business credit report.
What Business Credit Score Do You Need to Buy a Car?
When you’re looking to finance a new car, the first thing most lenders will look at is your business credit score. This three-digit number is a key factor in determining whether or not you’ll be approved for a loan as well as the interest rate, and it can also affect the interest rate you’re offered. You’ll generally need a business credit score of 660 or higher to buy a car.
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