Getting a car for your business involves a lot of formalities. It absolutely follows a different path from a personal car loan. A business car loan may follow stricter criteria, but you can overcome all obstacles to speed up the process.

An impressive credit report and a strong repaying capacity are two key factors. A personal guarantee is usually required if you are a limited liability company. Because your identity is different from your business, your lender will call you on to serve as a guarantor to hold you responsible for paying back in case your business fails.

The conditions for qualifying for a business car loan are different if you are a sole trader. This blog reveals how you can take out a business car loan with no personal guarantee.

Qualifying for a business car loan as a sole trader

You do not have a separate identity from your company if you are self-employed, which makes it a bit easier for you to get the nod. Your lender will check your credit score and repaying capacity before approving your application. Because you have your own business, your lender will go the extra mile to determine your affordability.

  • You will have to show your profit and loss account statement. Your lender may ask for statements of two years.
  • In the absence of a profit and loss account statement, you will have to submit your bank statement.
  • It is likely that your business account is opened separately, so the financial statements of that account are more than enough.
  • If you have a common account for your business and personal expenses, your lender will check if your account has enough money to keep up with payments after meeting your expenses.

It depends on whether a lender may or may not ask you for additional security. This is generally the case when your financial condition seems to be dicey. No lender would ever want to lose their money, so they may seek collateral to err on the side of caution. With the help of the following ways, you can qualify for a car loan without security:

  • Your credit health should be good. Your chances of approval are high when your credit rating is excellent.
  • Your bank statement should reflect less expenses and more income. Steadiness in your expenses and income boosts their confidence.

Qualifying for a business car loan as a limited liability company

The benchmarks for signing off on your business car loan for a limited liability company are different from those of a sole trader. It can be slightly difficult for you to get approval. You will have to meet the following conditions:

  • Business eligibility

Before you put in the application for a car, you should check whether your business is eligible for it. The following are the factors that lenders would like to examine:

  • How long have you spent in your business?
  • The annual turnover
  • Up-to-date information on directories – inaccurate information will make your business unreliable
  • Your income tax return
  • Public records such as bankruptcies and court judgements
  • Your business credit score
  • Personal finances of directors
  • Personal credit scores of directories

Your lender might ask you for a personal guarantee based on your business revenues, but you can get the nod for a business car loan without a personal guarantee.

  • Build a strong credit history with successful payments

Your business credit score should be excellent. No matter which type of financing you are using for your car, lenders would check your business credit rating. The score reflects your past payment behaviour.

  • Pay your business bills on time.
  • All suppliers’ dues should be settled on time.
  • Pay off your business credit card balance on time.

Your lender may check your personal credit rating, so make sure you keep that in good condition, too. Here are a few tricks to keep your personal credit rating in order:

  • You should pay your debts on time.
  • Try to pay more than a minimum payment if you are already in debt.
  • Do not owe more than 25% of your total credit card limit.
  • The total debt you owe, including your credit card balance, should add up to more than 30%.
  • Pay your rent and utility bills on time.
  • Use bad credit loans in Ireland to improve your credit rating.

You should try to keep both a business and personal credit rating perfect.

  • Shop around and negotiate with other lenders

There is no guarantee that your lender will waive off a personal guarantee clause because your business credit health and revenues are good. Therefore, it makes sense to shop around. You should get a prequalifying letter from lenders. This is when you will not lose your credit points and be able to know if you can qualify for a business car loan without a personal guarantee.

Discuss the terms and conditions in advance so you do not get ugly surprises when you officially submit the application. You can get to know these terms and conditions by contacting customer support by lenders.

The takeaway

It can be a bit difficult to get a business car loan without a personal guarantee. However, you can shop around and see if there are any lenders to sign off on your application. Make sure that your business is a separate entity. A personal guarantee is not required for sole traders or self-employed.

Understand the difference between a business credit score and a personal credit rating. Keep both of them in good condition. Read the fine print. There should not be any clause that holds you accountable for clearing your car loan if your business does not have enough money to pay it off.

If you do not understand any terms users in the contract, get clarity on that. Once you have signed the agreement, you will not be able to back out.

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