If you are looking to purchase a commercial vehicle for your owner-operator trucking business, you need to be aware of the factors that generally affect your ability to get a commercial auto loan. Here is a quick overview of the three primary factors that most lenders take into consideration when considering if they will offer you a commercial or business auto loan.
#1 Vehicle Age
One of the first things that a lender is going to look at is the age of the vehicle that you are interested in purchasing. A lender wants you to purchase a vehicle that still has value; you may have a tough time getting a lender to agree to a loan for a really old vehicle with an excessive amounts of miles on it. Any truck that you are interested in purchasing with a loan still needs to be able to put a lot of miles on it and hopefully be on the road and drivable well past the loan terms that you are asking for. A lender doesn't want to finance a loan for a vehicle that will not last the length of your loan term.
#2 Credit Score
As an owner-operator of a small business, many bank lenders are going to be interested in your credit score. Having a strong credit score will help you secure a loan with a lower interest rate and more favorable terms. If you have an okay credit score, you'll probably face a higher interest rate. If you have a really low or poor credit score, you may have difficulty securing a loan at all. If you are able to secure a loan, it may come with excessively high interest. You may also be asked to put down a large down payment if you have an okay or lower credit score.
#3 Cash Reserves
The third thing that lenders may look at is what type of cash reserves you have. As an owner-operator, you are responsible for bringing all the cash into your business. Lenders are going to want to make sure that you have enough cash flow to stay afloat and to easily afford to make multiple payments on your commercial auto loan.
Ironically, the more money you have on hand, the less money your lender is likely to ask you for and the less money you have in your cash reserves, the more money a lender is going to want you to put down on the vehicle.
Keep in mind that these are not the only criteria that you may have to meet. Your lender may also look at the length of time you have been in business, how much money you made the past few years, among other traits. For more information, talk to a professional like Las Vegas Finance.