Get Vehicle Financing for Your Business

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Companies can use vehicle financing to purchase SUVs, pickup trucks, luxury vehicles, passenger vans, cargo vans, utility vans, dump trucks, or delivery vans. While vehicle financing often mirrors personal financing processes, it gives businesses the choice to buy or lease. If your business has strong credit, you’ve been in operation for a considerable time, and you have good personal credit, you can finance a vehicle without a personal guarantee. Offering more assurances to the lender increases your approval odds. However, if you don’t meet these criteria, lenders might require a personal guarantee for the auto loan. If you do give this guarantee, the loan might appear on your personal credit report. Be cautious, as some loans include a prepayment penalty that can penalize you for settling your loan early.

Vehicle Financing Terms and Qualifying

To initiate vehicle financing, you need a down payment, your chosen vehicle, and knowledge of the associated purchase fees. You must provide documents verifying your business ownership, such as business licenses, partnership agreements, LLC documents, or articles of incorporation, showing you hold at least 20% ownership in the company. Lenders might also request your personal financial records, including your credit score and credit history.

If you’re a sole proprietor and the business operates under your Social Security number, you act as both the borrower and the guarantor, making you solely responsible for debt repayment. If you’re working directly with a bank, consider preparing a loan proposal. This proposal should detail your business information, financing needs, and financial data. Several factors influence commercial vehicle financing. For instance, the terms, like the duration and rates, depend on whether the vehicle is new or used. For used vehicles, the mileage also affects the terms.

Using Business Credit For Vehicle Financing

Building your business credit is beneficial if your company needs vehicles to operate. Using only corporate credit, you can finance or lease vehicles. Even without a personal guarantee, you can qualify using your business credit. This ability lets you grow your fleet without depending on a personal guarantee.

Ford offers a variety of business vehicle financing options, including loans, lines of credit, and leases, exclusively for legitimate business entities, excluding sole proprietorships. Ford might ask for a personal guarantee if your application doesn’t stand on its own merits. You can apply for Ford car financing directly at their showroom. Ford reports to D&B, Experian, and Equifax. To qualify, your entity should be in good standing with the Secretary of State and possess an EIN, DUNS number, business address, license, business bank account, and robust business credit history. Other automotive companies like Toyota, GMC, and Ram also offer vehicle financing.

Ally Finance provides both personal and business loans and reports to business credit bureaus, including D&B, Experian, and Equifax. You can secure funds solely in the company’s name if your business qualifies for financing without an owner’s guarantee. To be eligible for Ally’s Commercial Line of Credit, your entity should be in good standing with the Secretary of State and have an EIN, a DUNS number, a business address, a business license, a business bank account, a bank reference, and fleet finance references. There’s no specific business duration requirement. You must apply in person, and the dealer will decide if a personal guarantee is necessary.

Credit Line Hybrid

Credit Suite offers the Credit Line Hybrid as an alternative for vehicle financing. This unsecured loan boasts lower interest rates compared to traditional secured loans. The Credit Line Hybrid gives businesses some of the most generous loan amounts and credit lines available. With a stipulated income, you can secure 0% business credit cards. Many Credit Line Hybrid accounts report to business CRAs, letting you build your business credit simultaneously. You can continue using the credit lines even after settling the vehicle’s payment.

To qualify for the Credit Line Hybrid, you or a guarantor need an excellent credit score of at least 680. The Credit Line Hybrid doesn’t demand any financial statements. Typically, you can secure a loan amounting to five times your current maximum revolving credit limit, up to a potential $150,000 in credit.

401 K Financing

You can use your 401(k) as collateral for vehicle financing. However, it’s essential to understand that 401(k) funding differs from a business loan. You won’t face an early withdrawal penalty or tax penalty. You replenish your 401K plan through contributions, just like any other method, ensuring you don’t deplete your retirement funds. This method is termed a 401K Rollover for Working Capital, while the IRS labels it as a Rollover for Business Startups (ROBS). The IRS views ROBS as a distinct entity with its unique stipulations. The plan manages the transaction through company stock investments rather than the individual. Consequently, you might not access specific individual filing exemptions under such a setup. Since it’s not a 401K loan, there’s no interest to repay. Moreover, it doesn’t leverage a 401K or shares as a form of collateral.

401K loans offer low interest rates, typically below 5%. You should have a minimum of $35,000 in contributions in your 401K. In most cases, you can roll over up to 100% of your eligible 401K amount. Lenders will typically ask for your two most recent 401K statements. You can secure 401K financing even with severely compromised credit. However, you can’t leverage a 401K from your current employer, and you also can’t make contributions to it.

SBA 504 Loans

You can use the SBA 504 Loan to finance long-term machinery and equipment, making it distinct from a standard car loan. For heavy equipment purchases like cement trucks, dump trucks, tanker trailer trucks, or other custom-built heavy trucks, the SBA 504 loan is suitable. An SBA loan is the perfect choice if your business needs larger vehicles.

Credit Suite offers SBA loans. Established businesses with tax returns reflecting high revenues and profitability can access substantial amounts of money through Secured Small Business Loans. If you possess a robust credit score and positive business tax returns, consider applying for secured, government-funded SBA program loans ranging between $250,000 and $12 million. To qualify, the SBA requires various documents, including business and personal financials/credit reports, resume and background check, business plan, bank statements, and collateral. Your collateral should equal at least 50% of the loan value. The approval amount hinges on the collateral your business owns and the net profit you report on tax filings.

Closing an SBA loan typically takes between 2-4 months. SBA loans offer some of the lengthiest repayment terms in the business financing sector. You can secure loan durations of 10, 15, or 25 years with the SBA. The interest typically sits around 3% of the total debt, though the rate might adjust with the loan. For those considering an alternate route to business financing, a shelf company might be a viable option to explore.