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Striking out on your own in small business is a rewarding endeavour, especially if you are prepared to put in as much work as you can to be successful. Though you’ve made a sure bet on yourself, others may not share your enthusiasm. When it comes to applying for a car loan, they might reject you based on not being “fully employed” or not having complete documentation. However, there is a way to get car finance as a small-business owner, and get a great deal too.
Whom can I approach about financing a car?
The truth is, many lenders and brokers specialise in car finance for self-employed people or small-business owners. Many banks and lenders offer business loans, specifically for those who will use their car for businesses over 50 per cent of the time. Banks and lenders call these chattel mortgages or hire purchases. Both are similar considering they tie your car to the value of the loan, which you pay off as time goes on. The difference is that with a chattel mortgage, you own the car straight away; while a hire purchase only grants ownership after you pay the loan off.
What is the main difference between a car loan and a chattel mortgage?
An individual “retail” car loan differs from a chattel mortgage in many subtle ways. First off, businesses can claim certain deductions when taking out a chattel mortgage. Businesses can claim the GST, depreciation, interest and fuel input tax credit on their next BAS. Chattel mortgages are more flexible, giving business the choice of adding a balloon payment, longer or shorter loan terms and in some cases, seasonal repayments.
My cashflow is tied up at the moment. Can I still get a car loan?
Yes. Businesses can take out 100 per cent finance with chattel mortgages, and in some cases, take out over 100 per cent of the purchase price of the car. This way they can pay off insurance, registration and other on road costs over time instead of up front. This can help you get into the car you need to generate more cashflow sooner.
I am an ex-bankrupt. Can I still get a loan?
Yes – However, you must be prepared to jump through more hoops to get approval. You must also realise that ex-bankrupts or business owners with bad credit will generally have to pay more for their car loan with discharged bankruptcy, as the bank offsets the bigger risk. To make sure you can get the best shot at a chattel mortgage, you should make sure you can prove your “reformed” banking and financial conduct to your proposed lender. It also helps if you can pay down a deposit or can put up a security such as property to put your lender’s mind at ease.
Before applying for any financial product, you should always consult a professional first.
Brought to you by Satwik Chavda, Head of Digital Marketing, BadCreditCarLoans
