If our roads are the arteries of commerce here in Australia, our trucks are the red blood cells that inject life into our economy.
At Finance 48 – as the number one finance broker for trucks here in Perth – we are passionate about helping logistics and trucking companies to get moving.
Here are some FAQs that we feel may help you understand where to start and what’s required to get you and your trucks on the road.
Finance 48 will help to navigate you through the process every step of the way and ensure you get the finance that is right for you and your business.
How Much Can I Borrow?
The answer to this question isn’t straightforward as there are a number of factors involved in assessing your borrowing capacity.
Below is some of the information you will be expected to provide in order to secure a loan:
- Your capacity to service (what’s your available cash each month, after other commitments are met)
- How the truck “books” – that is, how it is “valued”, compared with how much the bank is prepared to lend against it
- Your credit file and credit score
- Your borrowing history
- How much other debt you’re carrying
- The level of lending (exposure) you have with the bank being applied to
- Age of ABN (the more established you are, the more comfortable a lender is likely to be)
- The overall “strength” of your profile
What Do I Need To Begin?
We tend to start with an initial chat with each client, as every scenario and every applicant is different. We then look to create a loan solution tailored to the applicant’s needs.
Our experience as commercial loan brokers in Perth means that we know how to weigh up the numerous variables to be considered. Variables include term, deposit, and residual (balloon, if required).
In terms of supporting documentation, it really depends upon each individual’s circumstances:
- If an established business, we will generally need the most recent set of financial statements and tax returns, your driver’s licence and details of the truck, as well as your application and consent (signed privacy form). If you operate a trust, we will require a certified copy of the trust deed.
- If a new-start business, will generally need your last year’s tax returns, 2 most recent payslips, a work order/contract to support the income you’re expecting to generate (important, as this will service the loan repayments). We will also require a cashflow forecast.
What interest rate will I be able to negotiate?
The interest rate question is a tricky one, and one we’re asked on a daily basis. In simple terms, lender’s determine the rate on a “risk-for-rate” basis. In other words, the higher the perceived “risk” associated with the deal, the higher the rate will likely be.
There are many factors lenders take into consideration in finance for trucks, including:
- Age of the truck (or trailer, or dollies, etc)
- Length of time in business (age of ABN)
- Current financials (profitability)
- Living position (mortgage, renting, boarding)
- Credit history and score
- Prior borrowing
- Borrowing history (track record)
The job of the broker is to take all of these into account, and workshop your deal with the lenders to see who will provide the most competitive solution.
Once agreed, the rate and total monthly repayment (interest and principle) will remain constant for the term of the loan.
What are the loan terms?
Loan terms can generally be from 1 – 7 years, usually depending on the age of the truck.
Some lenders will finance a truck “out to” 20 years of age at “end of finance term”.
Some even have no age restriction at all.
Do I get a better rate if I want to buy more than one truck?
Quite often you can, and it can also be linked to the size of the loan (usually referred to the NAF – Net Amount Financed)
A larger loan (for 1 or more trucks) can give the lenders more “appetite”, as there’s potentially more interest they can earn with larger amounts. So, there may be scope to push for a sharper rate.
Is it like insurance? Will I get a better rate if I take measures to track the vehicles?
Not in the current market. Rates are more linked to the factors referred to above, but that’s not to say GPS tracking won’t feature in the lender’s questionnaires in the future.
Does it matter who is driving the vehicles for the purpose of finance?
The driving record (including age) is more a question the insurance companies pose.
Your responsibility, once finance is in place, and you’ve taken possession of your truck, is to ensure it is comprehensively insured for the term of the loan, with the lender noted on the policy as the “interested party”.
Any changes to drivers (that may increase the insurance companies “exposure”) should be communicated to the insurance company immediately.
What if I want to sell my truck/s before the loan is repaid?
That’s ok, and it happens all the time (for a variety of reasons).
We can help you obtain the finance payout from the finance company and manage the sales process so the finance is paid out. Any balance left over is paid to you (or to the dealer, if you’re trading the current truck in on another one).
Can I/Should I use my home to help finance the vehicle?
You can, but there are potential downsides to this:
- If you re-draw on your mortgage for your home, you’re not required to direct any sales proceeds back into your mortgage when you sell the truck, so you could be paying for the truck long after its gone.
- Your home loan may attract a lower rate, but your home loan can run for 20, 25, 30 years. So you may end up paying a lot more interest on the truck in the long run.
Are the trucks the collateral on the loan?
Yes, this is preferred – as opposed to an “unsecured” loan.
With the truck as collateral (security), the lender has some “fall-back” position in the (hopefully unlikely) event things don’t work out, and they have to recover the truck, and sell it, to clear the outstanding debt.
An “unsecured” loan is higher exposure to the bank, resulting in a higher interest rate for the client.
Do you have to be a business?
Yes, you will be required to have an ABN (Australian Business Number)
Its free to apply for an ABN, and can be done quickly on-line
Without an ABN, other businesses must withhold 47% from payments they make to you for tax purposes
Sole trader or Pty Ltd?
This is a long and complex question, that we strongly recommend you seek professional advice for, from an accountant
There are many legal structures available to run a business, including a sole trader, partnership, trust or a company.
Your own personal circumstances will help your accountant guide you correctly here
What ID do you need?
Generally, you only need your driver’s licence (front & back), and some lenders may also request your Medicare
What financial records do I need to provide? I’m a new business and don’t have any books to show the lenders.
We often arrange finance for new ABN holders
As touched on above, your prior tax returns (showing the level of prior earnings) will be important, as well as current pay slips.
But it’s also important to show (prove) where the revenue is coming from for new businesses
Written contracts will go a long way here, and we regularly help clients put together cashflow projections, based on such contracts, as well as a number of other assumptions that may influence a lending decision.
The projections also carry a lot of weight (credibility) if prepared by an external accountant, and we have associates who can assist here.
What if it is a secondhand vehicle?
No problem, and it’s what we do the most of, as well as financing private sale vehicles.
In the case of private sale, we just need to “jump through a few more hoops” for the lenders, to satisfy them the vehicle (and vendor), are legitimate. We’ll need to:
- Arrange a vehicle inspection (often done via a digital inspection nowadays, eg Verimoto) of the vehicle
- Obtain a copy of the registration papers for the vehicle
- Obtain a copy of the vendor’s driver’s license
- Obtain proof of the vendor’s bank account
- Obtain a tax invoice from the vendor
- Run a PPSR check
- Obtain a payout lender if there is finance owing
Ultimately, this is as much about protecting the lender as it is about protecting you, the borrower.
Can I check if the vehicle I want to buy has been involved in an accident?
Yes, if you have the 17 digit VIN of the vehicle, you can run a PSPR report here.
Any Further Questions?
If you have any further questions or concerns about financing your fleet or would like to know more about where to get started, please get in touch with us today.