Many business owners use their vehicle for work purposes and for many, the vehicle itself is essentially, the business. In recent years the ride share industry has emerged and grown, offering work for a wide range of people. Either as the primary or secondary source of income. The delivery industry has also spiked, especially as a result of demand during the pandemic. When it comes time to purchase new vehicles, what are the motor vehicle finance options available to ride share drivers, delivery drivers and to small and micro business operators?
Businesses of this size and this nature can often face obstacles and challenges when applying for loans and finance especially through the more traditional or popular types of lenders. However, there is business finance which is specifically structured to suit the needs of small and start-up operations.
Eligibility for Business Vehicle Finance
The first issues that buyers in the categories we’re discussing should determine is their eligibility for business finance, eligibility to be a business entity and whether the vehicle would be considered a business asset or a private car.
For all types of business finance, applicants must hold an ABN. Those starting out in an enterprise can check their eligibility and details for applying for an ABN at the Australian Business Register website.
It should be determined whether or not the vehicle being purchased is classified as a business vehicle. The Australian Taxation Office (ATO) has resources to assist. Fringe Benefits Tax applies to business vehicles used for private purposes. Business owners may engage the services of an accountant to advise then on these matters. In simple terms, business vehicles should be for primary use in and by the business. Logbooks need to be maintained for a set period to determine the business: private use ratio.
The ATO has information around what is classified as a commercial vehicle.
If the criteria is meet for the vehicle to be considered a business asset then business finance can be applied for. If the criteria is not met, buyers can apply for a private car loan – Secured Car Loan.
To meet the eligibility for business finance, the minimum requirements are that the applicant does hold a current ABN and has identification.
Low Docs and No Docs Car Loans
Operators that are starting a new enterprise do not usually have the complete set of business documents and other criteria for a business finance application form. This documentation relates to financial records, tax returns, BAS statements and with some lenders, can also include time in business. Some lenders will have a minimum 1-2 year eligibility criteria.
For businesses that do not meet these criteria, no doc and Low Doc Vehicle Finance may be suitable. This type of car loan is not available through all banks and lenders. As a specialist in motor vehicle finance, Jade Car Loans has accreditation with lenders that do offer this type of finance.
The key difference between No Docs and Low Docs is the amount of documentation that the business can provide to support the application. Additional security against the loan may be requested by the lender.
Our lenders assess each application individually in regard to risk and hence, what interest rate will be offered for the finance. Applicants are strongly advised to ensure their personal credit profile is in good order as this can be included as part of the assessment process. As can the individual business operator’s financial situation.
Low Docs and No Docs Car Loans are available across the range of business finance loans including Chattel Mortgage, Commercial Hire Purchase and Vehicle Lease. The choice of which best suits the business will depend on a range of considerations such as accounting method and financial objectives. To assist in making the finance product decision, business owners are strongly recommended to refer to an accountant or financial advisor.
Tax Benefits
Where a business is approved for and accepts a business vehicle finance offer, the business should be eligible for the relevant tax benefits associated with that particular finance product. Tax deductibility of expenses will be dependent on ATO rulings. FBT may apply where the vehicle is also used for private purposes. An accountant is best placed to advise on this issue. An annual FBT return may be required or FBT accounted for when the annual business and personal tax returns are prepared.
If a private vehicle purchased with say a Secured Car Loan, is used for some business operations such as a secondary job as a ride share driver, the ATO rulings around allowable car expenses may be eligible for deduction from personal income tax.
Accessing Assistance
Individuals that are considering ride share work, delivery services or starting their own micro business can access a range of resources and engage a professional accountant to set-up the operation from a tax and accounting perspective.
To assist in sourcing finance, these types of enterprises are welcome to engage our services as their finance broker style lender. Our services provide businesses with access to lenders that only operate through finance brokers and expertise to source and negotiate finance on their behalf. Easing the way over many of the obstacles that often prevent new enterprises from achieving cheap motor vehicle finance.
Contact Jade Car Loans on 1300 000 003 for vehicle finance for all types of businesses
DISCLAIMER: IN REGARD TO MISREPRESENTATIONS AND ERRORS CONTAINED IN THE MATERIAL AS PRESENTED, LIABILITY IS NOT ACCEPTED. THE DETAILS AND CONTENT IS PROVIDED FOR CAR BUYERS AND INDIVIDUALS AND BUSINESS SEEKING FINANCE PURELY AS GENERAL INFORMATION. THIS IS NOT PROVIDED AS THE ONLY SOURCE OF FINANCIAL INFORMATION. ANYONE THAT CONSIDERS THAT NEED FINANCIAL ADVICE ABOUT THEIR SPECIFIC REQUIREMENTS SHOULD SEEK THEIR OWN FINANCIAL ADVISOR.