Can you get car finance when starting up a business?


Date: 3 August 2022

An entrepreneur signs a car finance application

When you are starting up a business, you might need a vehicle to run your business. If that's the case, the chances are that you will have a lot of questions regarding applying for business vehicle finance.

To help explain a bit about the process, this short guide will supply you with all the information you need to know about applying for car finance, ranging from eligibility to filling out the business car finance application form.

Checking you're eligible for car finance

Business eligibility

Before beginning the lengthy business car finance application process, it's worth making sure your business is eligible for business vehicle leasing.

There are many different types of business that can apply for a business lease contract, including sole traders (self-employed), limited company, partnership, limited liability partnership, public limited company or charity. For a business lease contract, the lease agreement must be in the name of the business and the vehicle must be insured on the company's fleet insurance policy.

A business may apply for business leasing if they are:

  • A business acquiring a company car or van for the business and private use of an employee
  • A self-employed individual applying for a vehicle for business and private use

Business leasing is not permitted if:

  • You're an individual employee wanting to use your personal car allowance – this would be a personal contract hire agreement
  • You're a director of a company looking to lease a vehicle in your name, not in the business name

Finance eligibility

Now you know if your business is eligible for business leasing, the next step is to work out if your business is likely to be accepted for vehicle finance.

To get a vehicle lease deal, your business will need to undergo a credit check as part of the finance application process. When considering your application, the finance provider will check the information supplied on your finance application with credit reference and fraud prevention agencies to determine if you are a viable risk to lend to. This information will then be used by the finance provider to determine whether you are eligible or not.

Other factors taken into consideration include:

  • how long your business has been trading for
  • business turnover per year
  • filing of accounts
  • public records
  • details of previous searches
  • personal finances of directors or the sole trader

Businesses under two years old or start ups with little financial information may find it difficult to get vehicle finance. This is because, compared to more established businesses, start ups lack a financial track record, making it difficult for the finance provider to objectively gain insight into the business and the potential lending risks involved.

Filling out the business car finance application form

It's likely there will be a range of both local and national companies offering car finance. You might decide you would rather deal with a local company so might be looking for car finance in Leicester , for example. Once you have found a finance provider, the next step is to fill out the application form. The form will typically be divided into five stages, each dealing with a different aspect of the business.

  1. Company details - This involves basic details regarding your business, including your company name and the registered company address, contact name, email address and phone number of the person who will be handling the arrangement of the lease.
  2. Business details - Next, you need to confirm the type of business, the company VAT number, the nature of the business and the number of directors, if applicable.

    You'll also need to supply specific information about the business premises, the annual turnover of the business and the date the business was established.
  3. Sole trader details - Here, you'll need to supply details of the owner/s of the business. Specific information will include full names, date of birth, number of dependents, property status and address history.
  4. Business bank details - You'll need to provide the name and address of the business bank account, along with the account number, sort code and length of time you've been with the bank.
  5. Reviewing your details and submitting your form - Once you have completed the form, you need to read through the information you have provided to make sure it is correct. This is especially important since supplying false information is a criminal offence.

You will be asked to confirm if your new agreement will be replacing an existing financial lease, purchase or loan agreement, and that you accept the terms and conditions. So, you should ensure you fully understand all aspects of the contract.

Additional information that might be required

If your business is less than two years old, or have previously been denied vehicle finance, you may be asked to provide additional information, which could include the following:

  • three months' business bank statements
  • management accounts
  • a director's guarantee

Now that you know a bit more about the process of seeking business car finance, why not check out this Auto Express rundown of some of the best company cars for 2022 ?

Copyright 2022. Featured post made possible by Car Finance Genie.

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