Our office regularly receives phone calls from potential clients seeking information on how to finance a truck when starting a new business.
Below is a list of requirements and considerations when looking to finance a truck for those looking to become an owner driver.
1 – Has an Australian Business Number been Registered?
- Is it a requirement to form a company as some transport companies require their contractors to have a company registered?
- Sole trader ABN if just one individual involved in the business
- Partnership ABN if two individuals involved in the business
2 – What is the Background of the applicant?
- Has applicant had stable employment as a truck driver or machinery operator
- What type of administrative support is in place to run the business – ie from an Office Manager, Bookkeeper or Accountant
3 – Is There Confirmation of work for the new truck?
- We will require some form of work commitment either via a work source letter confirming that our client will be a preferred contractor earning X per week
- Is a work contract available between the client and a company they will be working for – indicating terms and pay rates of the contract
4 – Is There Proof of income and expenses going forward?
- Has there been due diligence done on the company financial statements (if buying an existing truck / run from a current transport company)
- If a new start business, a cash flow projection showing income and expenses for the next 12 months needs to be submitted to our credit team (this cash flow can be prepared by an accountant or alternatively, our office can complete one)
5 – What type of deposit funds are available?
- Given the high risk nature of a new start business, an upfront deposit paid to the vendor of the truck will mitigate some of this risk
- In the absence of an upfront deposit, collateral security can be taken over other items of equipment held by the client – i.e. term deposit, property, motor vehicle or encumbered capital equipment
6 – Is the Applicant Asset backed?
- Asset backing of an applicant is another area that our credit team will consider when assessing deals relating to truck finance for a new start business.
- It is viewed favourably if applicant has good equity in property, if in the event there is a major breakdown on the truck, funds can be raised against the property in order to cover the repairs
- Good working capital position is another area of consideration that our credit team will be looking at. Often owner drivers are not paid for 30 – 60 days and therefore need to cover short term business expenses (i.e. fuel, maintenance) whilst successfully making truck payments on time
7 – Will a Low Credit Score Be a Factor?
- A low credit score or adverse credit listings will affect an applicant’s ability to finance a truck for the first time. If adverse credit does exist, the rate paid by the client will be higher than someone with a higher credit score.
8 – How old is the truck?
- Most mainstream lenders do not wish to finance a truck that is any older than 5 –7 years old at time of purchase
- If the age of the truck falls outside of the 5–7-year-old mark, a larger deposit could be required or a risk rating applied to the base finance rate
As you can see above, there are many factors to consider when undertaking commercial truck finance for the very first time.
In order to achieve the best result when looking to finance a truck for the first time, it is important to deal with a finance company that specialises in truck finance.
Given our based expert knowledge of both the finance and transport industries, Heavy Vehicle Finance has helped many new start businesses in regards to financing new and used trucks.
To talk to a finance consultant, please call 1300 788 740 or click here to apply online.
