What a Business with Bad Credit Can Do to Get a Car Loan

What a Business with Bad Credit Can Do to Get a Car Loan


  • Commercial car loans are quite different to consumer loans and offer business owners much more leeway, especially those with a poor credit history. 
  • There are two types of commercial loans, but both work with the same principle. In most cases, the amount you finance can exceed the value of your car to help you build your credit rating back up.
  • Keep reading to learn more about commercial loans, how they work and how to apply.

Sometimes businesses run into trouble with their finances, leaving them with bad credit. Poor credit history limits your chances of approval for a car loan, even if the car is crucial to business operation.

If you have a poor credit rating, a commercial loan may be the best option to secure a loan for a car.

How Commercial Loans Are Different to Consumer Loans 

Commercial loans are very different from consumer loans (marketed just as “car loans.”). Car loans for business people allow much more latitude than consumer loans do.  Lenders secure the loan against your vehicle. You must use your car for more than 50% of business operations to qualify.

These loans come in two different variants: chattel mortgages and hire purchase. Both work the same in principle, but look different on your balance sheet. A chattel mortgage means you gain an asset; a hire purchase means your repayments are taken out of operating expenses as the vehicle’s title remains with the financier.

Businesses can apply for chattel mortgages and hire purchases without a deposit. You can also claim the GST back on the purchase price and tax deductions on depreciation, interest payments and full input credits (ask your accountant if your business or asset is eligible.)

More Than 100% Finance?

In many cases, the amount you finance can exceed the value of your car. This way you can keep cash flowing as you begin to correct your credit. With the extra money, you can pay off maintenance, registration or insurance cost over the course of your loan.

In many cases, you can extend or shorten the loan term according to your needs and offset regular repayments with a balloon (residual value) payment due at the end of the loan.

How You Can Help Your Business Car Loan Application

You can help with your finance application to perhaps achieve a better car loan interest rate. Though you can finance a car without a deposit, it’s generally a better idea to put some money upfront to have ‘skin in the game.’ This puts less burden of risk on your financier that may influence your offered interest rate.

You should also check your own credit history (if you are a sole trader) to see if you have any errors recorded on it.

Honesty Is the Best Policy

At the end of the day, you should be honest with your lender – you are entering into a long-term business partnership after all. Openness and transparency about your situation will always go in your favour. Once you regain your financial standing, you can ask your lender about refinancing at a more favourable rate.

To find out if this is right for you, you should speak to a financial professional first.

Bill Tsouvalas

Managing Director at Savvy

Bill Tsouvalas is CEO and Managing Director of Savvy Finance founded for giving Australians access to finance using the latest technology. Savvy was named one of BRW's fastest growing companies in 2015. Bill has dedicated himself to educating Australians on finance and economics, commissioning a Financial Literacy Survey in January 2020. He regularly writes on personal finance, business finance, and economics for a variety of blogs and websites. He is also patron of Kids Under Cover, a charity helping end youth homelessness.