As finance brokers, we understand that running a business requires a significant amount of investment, both in time and money. One of the most significant investments for many businesses is the purchase of a commercial vehicle, such as a truck or a van. However, financing this purchase can be challenging, particularly if you’re not familiar with the lending process. That’s why we’re here to help. In this blog post, I’ll explain the key factors that lenders consider when assessing a loan application for a commercial vehicle, and provide some tips on how you can increase your chances of getting approved for finance.
The Four Key Factors to Consider
When it comes to applying for commercial finance for a truck, van or other commercial asset, there are four critical factors that lenders will typically consider:
- Income
- Good credit
- Asset backed
- Active ABN age of more than 12 months
Let’s explore these four factors in more detail.
- Income
One of the most important factors that lenders consider when assessing a loan application is your income. Lenders want to be sure that you have the means to repay your loan, so it’s essential to provide evidence of your income. This can be demonstrated through your bank statements or a work source letter that proves your potential to earn income. If you’re self-employed, you may need to provide additional documentation, such as tax returns or financial statements, to prove your income.
- Good Credit
Another critical factor that lenders consider when assessing a loan application is your credit history. Your credit score is a numerical representation of your creditworthiness and is based on factors such as your payment history, credit utilization, and length of credit history. Lenders use your credit score to assess the risk of lending to you, so it’s essential to maintain a good credit score. For commercial vehicle finance, you generally need a credit score of more than 500 to have a chance of approval.
- Asset Backed
Having assets can also be beneficial when applying for finance. If you already have a property with or without a mortgage/home loan, this can demonstrate to lenders that you have a level of financial stability and may increase your chances of being approved for finance. Assets can also be used as security for the loan, which can result in a lower interest rate or more favorable terms.
- Active ABN Age of More than 12 Months
Having an active ABN (Australian Business Number) for more than 12 months is also a critical factor when applying for commercial vehicle finance. Lenders want to see evidence of a stable and established business, and an ABN that has been active for more than 12 months demonstrates this. In some cases, lenders may also require you to be GST registered to qualify for commercial vehicle finance.
Tips for Increasing Your Chances of Getting Approved
Now that you understand the key factors that lenders consider when assessing a loan application for a commercial vehicle, here are some tips to increase your chances of getting approved for finance:
- Provide as much evidence of your income as possible, including bank statements, work source letters, and financial statements.
- Maintain a good credit score by paying bills on time, reducing credit card balances, and limiting new credit applications.
- Consider using assets such as a property as security for the loan to improve your chances of approval.
- Make sure your ABN has been active for more than 12 months and is in good standing.
- Work with a finance broker who can help you navigate the lending process and find a loan that meets your needs and financial situation.
In summary, getting approved for commercial vehicle finance requires at least two of the four key factors: income, good credit, assets, and an active ABN. It’s important to provide evidence of your income, maintain a good credit score, consider using assets as security, and make sure your ABN is active and in good standing. Working with a finance broker can also help you find the best loan options for your business. So, whether you’re looking to buy a truck, van, or any other commercial asset, keep these tips in mind to improve your chances of getting approved for a loan.
