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How to Buy a Car With Business Credit: Using Business Assets

June 20, 2023
How to Buy a Car With Business Credit

Your business has assets, and one you may not know much about is business credit! You can leverage these assets in all sorts of ways. So, this is how to buy a car with business credit.

Here are step by step instructions to show you how to use your company credit in ways you may have never thought possible before. Lean on your credit history and get a company car or other vehicle for a business purpose.

Step 1 – Build Business Credit

If your small business doesn’t have a good business credit score, then your quest for a business auto loan is going to end before you even get started.

And just like with personal credit, the better your credit score, the lower your interest rate and monthly payment are going to be. 

One part of how to build business credit is to work on your personal credit if it is lacking. Bad credit and a low personal credit score will especially impact your small business credit score with Experian. 

Personal credit will also loom large because you, the small business owner, are the obvious user of the vehicle.

So, look at your business and personal credit history.

Good business credit will also come from paying your credit card and other business debts on time.Good credit on the personal side will, in part, also come from taming your credit utilization. 

Consider this: what is the highest credit limit on any business credit cards you’ve got? A higher limit, even on just one business credit card, will help to assure a commercial auto loan provider that you and your business are a good risk for them to take.

So, if your limits are low, talk to your credit card issuer. If you’ve been paying your bills on time, they may be open to raising your limit.

Get Your Free Business Finance Assessment to Discover your Optimal Path to Improve Fundability™, Build Business Credit, and Get Business Loans

Step 2 – Your Business Needs to Be Turning a Profit

Of course, a lender is going to want to know that you can and will pay any small business loan back. This means your business will have to be able to show profits. And, it will likely have to prove that you have regular cash flow. 

A lending institution will want to see your company’s financial records before offering any financing for you to buy a business vehicle. 

Since lenders judge risk by assessing the chance that borrowers will default, you will have the best chance of securing a vehicle loan if you show that your business is making money and unlikely to fold any time soon.

This is one of the reasons why many financing companies will not provide lending unless you have been in business for a few years. It’s not just to be able to get certain records from you. It is also important to help prove to these lenders that your business is making money. 

And, this will help to demonstrate that your business has some staying power. Brand-new startup businesses tend to not inspire that kind of confidence in lending institutions.

Your best bet for Fundability™ in this area is to have your business’s financial records prepared by a financial services professional. A CPA or accountant is best, but at the very least have a bookkeeper do the work. 

Step 3 – Check Copies of Your Credit Report

Get a copy of your business and personal credit report and make sure that they are correct. Do your reports show that you are paying off your best credit card on time? Does your credit history show that you’re paying off your other cards on a timely basis?

After all, you shouldn’t be neglecting what might not be your best credit cards.

What about UCC blanket liens, judgments, open lawsuits, and bankruptcies? These could all be on your reports. But how old are they? Some lenders may be able to look past older derogatory issues if you’ve cleaned up your act since then. Others may not. 

If there are errors in your credit reports, then make sure to dispute and get them corrected before you even think about applying for vehicle financing

Disputing is possible online. Make sure you can document your complaints to any corporate credit reporting agency who report you are disputing.

If you have been monitoring your company credit, then you would have a head start on knowing what’s in your credit reports.

Here at Credit Suite, we can help you to keep track of your corporation credit and your reports. Know what the bureaus know about your credit—and know it before you even think about applying for funding. 

That way, you can avoid potentially unpleasant surprises later.

Step 4 – Get Together a Business Loan Proposal

How to Buy a Car With Business CreditYour auto loan proposal should detail why you want a truck or car loan, how you will use the business vehicle in your business and what your business actually does. 

Be sure to include the loan amount you want to borrow, and the amount you have for a down payment. Add in any details about any collateral you have to offer. 

In many cases, the vehicle you are buying is used as the collateral. Include information about your marketing strategies and your company’s past and current performance as well.

If you think this sounds, at least in part, a lot like a business plan, then you would be right. 

So, if you already have a well-written business plan, there is no reason not to get a lot of your supporting information directly from it. And, if you don’t yet have a well-written and well-thought-old business plan, then there’s no time like the present.

This is particularly important because a lending institution may very well want a copy of your business plan anyway when you apply. In addition, a good business plan has a myriad of uses that go far beyond business funding and credit.

You might even want to use it to make plans for your business.

Get Your Free Business Finance Assessment to Discover your Optimal Path to Improve Fundability™, Build Business Credit, and Get Business Loans

Step 5 – Shop Around and Compare the Loan Term and Rates

When it comes to commercial vehicle financing, you should think outside the traditional lending institution ‘box’. Because maybe your best bet for your business car financing is an online provider like Capital One, Crest Capital, or National Funding.

Look for how much financing you can get from a particular auto loan provider. Also look at the overall cost of that financing.

What sort of interest will you be paying? How will you be paying back the financing? Some financing institutions may allow for a draw on your account, like with a business line of credit. While that’s certainly convenient, is it the best choice for you?

Also check with the Small Business Administration. If your personal and business scores are good, then the SBA may be able to help you. The SBA has good rates, so they are definitely a source of financing to consider.

Yes, this will take you some time. But it will be time well spent, particularly if you can avoid a bad loan with an equally unsuitable financing company. 

It will also help you to save time, as you can avoid applying for funding at lending institutions where either you have a very low chance of acceptance or you wouldn’t want their terms, anyway.

Step 6 – Select the Best Lender for Your Purposes

The best lender for your business auto loan might turn out to be a credit union. But check out commercial lending institutions as they have more experience with the very sort of auto loan you are looking for, versus credit unions. 

If your consumer credit score is lacking, then you will have fewer options. That sort of issue will cloud your choices. 

But don’t just settle for the first lending institution that will accept your credit score. Consider the whole cost of the loan, and even other expenses such as car insurance. Financing is more than the amount you have to pay back, and how quickly.

It’s also about how manageable the payments are. A shorter term loan may cost less in terms of interest. But the payments every month are likely to be high. Can your business afford those payments?

Your business entity may even come into play. For example, if your business is still a sole proprietorship, then a lending institution might be averse to lending to you. Certainly, they will want to look at your consumer credit closely.

And in particular, if your accounts are not separated, they may not be able to tell what are eligible purchases in your accounts that pertain to your business and have been paid back.

Step 7 – Gather Together and Provide all Required Documentation

You will likely have to prove your business has the cash (or can get it) to pay back a business auto loan.

Furthermore, a traditional lender in particular is going to want you to have been in business for a few years already before they will consider an application for an auto loan or really any vehicle loans.

They will want to see business tax returns and cash flow statements. A lending institution may even want a business plan outlining your business purposes for buying a car. 

You’ll need to provide bank statements showing how much cash is in your business checking and savings account. And you will need to produce credit bureau reports on your business and probably on yourself.

This will need to be the actual report. A summary from, say, Credit Karma, is not going to cut it.

You will also have to prove your ownership in the company. For a corporation, you will have to provide your lending institution with articles of incorporation that list you as having at least a 20% ownership stake in the company. 

For other types of business entities, you may need to hand over a partnership agreement, limited liability company documents, or a business license.

Get Your Free Business Finance Assessment to Discover your Optimal Path to Improve Fundability™, Build Business Credit, and Get Business Loans

Step 8 – Fill Out the Loan Application

In part, this is going to entail providing personal information. Federal law requires that, for a loan for a business, a lender will need to get the Social Security numbers from any owners with a certain percentage stake in the business. 

This is to prevent money laundering and it is not negotiable. So, as you are providing your Social Security number, you will need to be mindful and make sure that you are not also providing a personal guarantee.

How to Buy a Car With Business CreditMany lending institutions have online applications, but check, in case it would be better for you to apply for an auto loan in person. Some financing terms may even be negotiable, but the best way to engage in any negotiations is in person.

Of course, if and when you get an approval, then the last step is to actually accept he loan.

Sign all of the loan acceptance forms after the lender approves your loan. Usually, each person with at least a 20% ownership stake will have to sign the documents. This is the last step before the funds for the new vehicle are made available to you.

After that, of course, the next thing to do is get your vehicle!

Takeaways

For anything in business, including lending, it quite literally pays to be mindful and careful. 

Planning how and where you will get a loan, along with how you will set your business up for application success, will make sure that the process for buying a vehicle with company credit is a sweetheart deal, and not a lemon.

Contact us today to find out how we can help you qualify for business financing and credit, for vehicles and beyond.

About the author 

Janet Gershen-Siegel

Janet Gershen-Siegel is the seasoned Finance Writer and a former content manager at Credit Suite. She has been admitted to practice law for over 30 years, with a focus on litigation and product liability, and is a published author, with writing credits at Entrepreneur, FedSmith.com and BusinessingMag.com.

She has a BA in Philosophy from Boston University, a JD from the Delaware Law School of Widener University, and a MS in Interactive Media (Social Media) from Quinnipiac University.

She regularly writes for Credit Suite, which helps businesses improve Fundability™, build credit, and get approved for loans and credit lines.

Her specialties: business credit, business credit cards, business funding, crowdfunding, and law

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