If you are self-employed, one of the biggest challenges you will face is being able to secure financing both for your business and your personal needs. While lenders are more flexible when it comes to underwriting self-employed car loans, there is still much work to be done. So, we are going to look at what steps you can take to get the best deal on car loans for business owners.
Key Variables That Go Into Car Loans for Business Owners
There are some key variables that prospective lenders will ask when trying to determine whether they will approve your car loan as a business owner.
Something that you should bear in mind is the lender wants to issue the loan and is looking for reasons to say “yes.” These lenders are in the business of issuing loans that generate interest income.
If they are not able to originate enough loans, they go out of business, but they need to temper this desire to issue loans with the risk of taking on bad debts, so it is a constant battle of trying to keep Murphy’s law at bay.
Questions Lenders Will Need Answers to Before Making a Decision
- How long have you been self-employed? The general rule of thumb was two years or more to be considered stable. Most small businesses fail within the first five years, but Covid has changed the world in a profound way. Suppose your business has been running for less than two years. In that case, you will need to show bank accounts, purchase orders, and details about why you expect your business to continue to grow.
- What is the structure of your business? Is it a sole-proprietorship, partnership, or incorporated? There are different legal liabilities based on how your business is structured. No matter the structure, you will be personally liable for the car loan, but generally speaking, most self-employed Canadians start out as a sole-proprietorship and go from there.
- Do you have good credit? Being self-employed, you probably run your business expenses through your personal credit card and/or lines of credit. This can drive up your credit utilization rate, which brings down your credit score.
- Is your cash flow flowing? Your accounts receivable can make or break your business. While getting customers is great, you need to make sure you are being paid in a timely manner, or you will be swimming in debt. Lack of cash flow means you fall behind on your obligations; your credit score drops, making it even more difficult for you to get financing. By staying on top of your accounts receivable, both you and your lenders will have peace of mind knowing you will be paid.
How to Get The Best Business Car Loans in Canada
This is where you need to turn to the professionals for help; contact your local car dealership and let them do all of the heavy lifting.
These dealerships will know which lenders are the most aggressive when it comes to underwriting self-employed car loans. By working with these dealerships, you will be able to get yourself into a brand-new car at a very competitive interest rate.
Click here to get approved for car loans for business owners! we have a team of credit specialists ready to help you find a vehicle suited to your needs and will work with you no matter your credit score.