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Small Business Auto Loan: What Is It and How to Apply

Small Business Auto Loan: What Is It? How to Apply?; Do you need one or more vehicles for your small business? Learn about small business auto loans that may be available to you.
Susan Guillory

Susan Guillory

Updated July 20, 2021
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Even if your company uses automobiles, vans, or trucks, you likely don’t have cash on hand to purchase them. That’s where small business auto loans can come in handy. By financing your company cars, trucks, and related equipment, you may be able to conserve cash and get the vehicles you need to run your business.

What is a Commercial Auto Loan?

Commercial auto loans, also known as business vehicle loans, are similar to personal auto loans. You borrow the money you need to purchase a vehicle, then you make payment on that loan each month until you’ve paid off the principal, interest, and fees. The loan is considered secured because the vehicle you’re purchasing acts as collateral for the loan. If you default, the lender may seize the vehicle.One difference between a personal and a commercial auto loan is that, rather than looking at your personal credit history, lenders may instead look at your business credit history to determine your eligibility for a commercial auto loan. If you don’t have established business credit, however, your personal credit may be used.

Commercial Truck Loans

Maybe you’re looking into a commercial auto loan because your business uses a fleet of vans. But if you have a fleet of semi trucks, you might not be able to borrow enough with an auto loan to cover the expense. In that case, you may want to explore commercial truck loans, which, as their name suggests, are designed specifically for trucks. These may be available in higher loan amounts to cover the cost of these commercial trucks, which can run as high as $200,000 each.

How to Get a Commercial Auto Loan 

Small business auto loans typically aren’t difficult to get, but a little advance planning can make the process easier.The first step is to know your business credit scores so you have an idea of what you’ll qualify for. Each lender may have different requirements (we’ll cover those in a minute), so while searching for auto loan providers, check what those requirements are.Research what information you’ll need to apply for your commercial auto loan. You may be asked questions about the vehicle you want to buy, including:
  • Is it used or new?
  • What are its year, make, and model?
  • What’s the purchase price?
  • How much will you put down on it?
You’ll also need to provide the loan amount you’re asking for, as well as the number of months you want to take to pay back your loan. It may be tempting to take the maximum number of months possible to pay off the vehicle, but know that if you do, you may pay a higher interest rate.

Commercial Auto Loans with Bad Credit

It may be more challenging to get a business loan with bad credit. But getting a commercial auto loan, even if your credit is poor, may not be too difficult with some lenders simply because the vehicle serves as collateral.You may also consider adding a co-signer to beef up your eligibility for the loan. You could also ask the lender whether you can provide a down payment that’s larger than required to get the funding you want.

Commercial Auto Loans Without a Personal Guarantee

Even business loans often require personal guarantees. That means that if your business is unable to pay back the loan, you will be held responsible for paying it. That could put a damper on your ability to qualify for other personal financing, such as taking out a mortgage for a home.It is possible to find small business auto loans that don’t require a personal guarantee. You will need to provide a solid business credit score and potentially a larger down payment on the vehicle you’re purchasing.

Business Auto Loan Borrower Requirements

Next, let’s talk about those small business auto loan requirements. While most lenders are likely to have similar general qualifications, each may have slightly different requirements, especially when it comes to credit scores. If you’ve ever applied for loans for sole proprietors, you’re probably already familiar with most of these requirements.As mentioned above, your credit scores matter. Because you’re taking out an auto loan for your business, lenders will most likely first look at your business credit score. Most lenders don’t publish their required business credit scores, which may mean that they are flexible and will consider other factors, such as your revenues.Other lenders may have requirements about the vehicle you’re purchasing. Bank of America, for example, will provide loans for vehicles with a minimum value of $10,000 that are no more than five years old and that have fewer than 75,000 miles.Some car manufacturers, like GM Financial, offer small business financing for their brand of vehicles. These may involve discounts or other incentives. If this is an option, you’ll be limited only to that brand, or family of brands, of cars.

Buying vs. Leasing

When shopping for vehicles, consider whether you want to purchase the vehicle outright and own it or if you’d rather lease it instead. There are potential benefits and drawbacks to each option.

Lenders that Offer Small Business Auto Loans

There are several companies that offer auto loans for businesses. Here are four that rank highest in internet search results for “small business auto loans” as of May 2021. 

Bank of America

Bank of America is known for a variety of financial products for both business and personal accounts, including loans for commercial vehicles and auto loan refinancing. If you’re a Preferred Rewards for Business client, you can save between .25% and .50% on Bank of America's Interest rates, which start at 2.49%. Repayment terms are available for 48-72 months.

Ally

In addition to vehicle financing, Ally offers both open-end and closed-end lease options, heavy-duty truck financing, and a commercial line of credit. Loan terms can extend up to 75 months. Ally works with certain auto dealers, and you can search to find one on its site.

Capital One

Capital One offers both commercial vehicle and equipment loans of $10,000 or more for up to 60 months. To qualify, your business needs to have been in operation at least two years, and you must be a Capital One customer.

PNC

Another option for a small business auto loan is PNC. You may qualify for 100% financing of the total invoice amount of the vehicle you’re purchasing, up to $250,000 over 72 months.

Small Business Auto Loan Alternatives

In addition to small business vehicle loans, there are other types of small business loans you might consider, either to help with that auto purchase or to cover other business expenses.If you qualify, a loan from the Small Business Administration could get you the funds you need at low interest rates. While there aren’t specific SBA commercial vehicle loans, you may be able to use the SBA 504 loan for business vehicles or equipment.A traditional long-term small business loan might also be an option. Rates, terms, and fees can vary, but typically APRs are lower for long-term than for short-term loans. While the application and turnaround time can be relatively lengthy, if your business has a relationship with a traditional lending institution already, this might be a good option to look into. If you need other types of financing, such as a small business rental property loan, business credit card, or line of credit, see what your business credit score looks like to gauge what you’d qualify for.

The Takeaway

Exploring car loans for small business owners can be well worth your time because your research could help you find the best rates possible to finance the vehicles your company needs.Ready to look for your loan? Lantern by SoFi can help. Compare rates from our  different lending partners to find the one that works for you.
The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.SOLC0521093

Frequently Asked Questions

Can a business finance a vehicle loan?
Can you buy a car with business credit?
Can I buy a car with an SBA loan?
Is a personal guarantee mandatory for a business auto loan?
What paperwork do I need for a business auto loan?
Can an LLC get a car loan?
How do you finance a car with an LLC?

About the Author

Susan Guillory

Susan Guillory

Susan Guillory is the president of Egg Marketing, a content marketing firm based in San Diego. She’s written several business books, and has been published on sites including Forbes, AllBusiness, and Cision. She enjoys writing about business and personal credit, financial strategies, loans, and credit cards. Follow her on Twitter @eggmarketing.
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