When running a business, one can have a number of requirements that are vital for its functioning. In a number of cases, the amount that has been set aside to meet the expenses of these requirements might not be sufficient and business owners can sometimes be required to borrow funds. One of the many requirements of a new business can sometimes be a vehicle. This might be a requirement for a number of reasons and there are quite a few lenders that offer business owners loans for the purchase of a vehicle for their business operations.
Auto loan for business
Business auto loans or commercial vehicle loans are loans that are usually taken out by individuals who run businesses and require financing for a commercial vehicle. In most cases, the business owner is required to pay 20% of the cost of the vehicle as a down payment and the lender pays the remaining 80% of the cost of the vehicle. Some banks also offer 100% financing of a commercial vehicle.
Banks and financial institutions usually have a certain eligibility criteria for those who apply for commercial vehicle loans. The following is a list of businesses that are eligible to opt for a commercial vehicle loan:
Individuals who are first-time buyers of commercial vehicles
Private Limited Companies
Public Limited Companies
Schools and Colleges.
In order to be eligible to borrow funds for the purchase of a commercial vehicle, the loan applicant has to meet the following criteria:
The applicant should be between the ages of 26 and 65 years
In case of salaried individuals, they have to have been working at their place of employment for a minimum of 2 years.
Self-employed individuals are required to have a minimum of 2 years business experience.
Individuals who already own commercial vehicles are required to show proof of their vehicle ownership, usually a minimum ownership of 3 to 5 years.
First-time buyers, fleet owners and individuals are required to have a guarantor sign off on their loan application.
Applicants are required to show proof of residence and are required to have lived in that residence for a minimum of 2 years.
Trusts, associations, partnership firms and private companies are required to provide 2 years of audited financials at the time of applying for the loan.
Features and benefits
The following are some of the features and benefits of a commercial vehicle loan:
Loan applicants can choose from various types of commercial vehicle loans based on the type of vehicle they wish to purchase.
As mentioned previously, some banks and financial institutions provide up to 100% financing for their commercial vehicle loan applicants.
The EMIs for the repayment of a commercial vehicle loan tend to be comparatively lower than other loan types since the tenure for these loans range between 48 months and 60 months.
In most cases, the credit score of the applicant has very little impact on their eligibility for a commercial vehicle loan.
Most commercial vehicle loans have a quick processing time.
The documentation process is quick and simple.
Most banks and financial institutions take approximately 7 working days to disburse the loan amount.
A penalty charge of approximately 2% of the loan amount is charged when business owners prepay their commercial vehicle loan.
Several banks and financial institutions offer commercial vehicle loans based on the type of vehicle being purchased. They are usually of 4 types and are as follows:
1. New vehicle loan
2. Old vehicle loan
3. Vehicle refinancing
4. Top-up loans
The following is the list of documents that a business owner is required to submit at the time of applying for a commercial vehicle loan:
6 months bank statements
2 years Income Tax Returns (ITR)
Audited Financial Statements of the business
Cheque for processing fee
3 months’ Salary Slips
Proof of identity
Sales Tax Certificate
Duly filled application form
The rate of interest charged on the amount borrowed for the purchase of a commercial vehicle varies across lenders. In most cases, the rate of interest is set anywhere between 10% and 15%. The rate of interest that is charged varies based on the borrower and the type of vehicle they wish to purchase.
In the recent past, there has been an increase in the number of individuals who have been looking for financing for commercial vehicles. As a result, the number of banks and financial institutions who have begun to offer commercial vehicle loans to business owners has also increased.