Guide to vehicle finance for start up businesses

“We have teams of people working on electric cars. So you never know – you may find Virgin competing with the Tesla in the car business as we do in the space business.” – Richard Branson


Setting up a business isn’t cheap.  Costs can include stock, premises, living expenses, professional and legal services, staff, loan repayments, licence fees and, of course, vehicles and their running costs.

The majority of businesses need vehicles to carry out the operations of the enterprise whether it’s vans for moving products, equipment and people or cars for visiting clients and doing the deals.

So what are the options open to a start up?  Most seem to go one of two opposing ways; they either get something newish and smart or run an older vehicle until the budget allows something better.  Let’s think about these options and then look at a third way – vehicle finance.

Keep the heap, splash the cash, or cue new?

Retaining existing vehicles is an obvious consideration.  But a van or car that was suitable in a past life such as commuting to an office may not be appropriate for fronting a new business.  That vehicle forms a key part of the impression given to new and prospective clients.  Looking successful and stable is crucial to winning and retaining sales.  Turning up to pitch for, or fulfil, business in an old banger risks undoing all your good work.

Additionally, an unreliable motor will introduce further costs such as repairs and loss of business whilst off the road.  If the vehicle is new enough, smart enough and fit for its new purpose though, there’s no need to rush to replace it and keeping it for a year or two could be a wise move.

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Many new entrepreneurs readily recognise the importance of image (with respect to their choice of transport) and buy a new or used van or car with cash they may have on hand.  The dilemma here is how much to spend and what else could they do with the cash.  Spend too little and the perception problem will remain.  Spend enough to look established but risk the future of the company as cash could be diverted away from essential needs like stock replenishment, wages or food.

What few new businesses realise is that finance is available for brand new vehicles to be leased for a predictable monthly cost.  The assumption tends to be that ‘no finance company would touch a start up’ due to the risks involved.  After all, depending on whose figures you use, up to 90% of businesses fail in their first five years so statistically they are not a good bet and that’s what many of the leasing companies have concluded and therefore they limit lending to companies and sole traders that have been in business for more than two years.

But some take a different approach and will gladly fund a vehicle at prime rates for a new business providing the deal is structured to minimise their risk.  With this in mind, a new van or car (with the positive image that it brings) and low, predictable monthly costs may tick all the boxes and be well worth considering.

Here’s a couple of vehicle finance case studies

1. A security company that had been set up 18 months earlier needed a small van.  They didn’t expect to be approved as they had been turned down by two other suppliers due to nothing other than their newness.  By structuring the finance correctly, the application sailed through.  In this case, no Director’s Personal Guarantee was required either.

2. An accountant introduced a brand new plastering company (so new that they had yet to trade) but with a contract to fulfil.  They required two Transit Custom vans initially with another couple likely within 6 months.  By matching them with the right finance companies and the right contract the initial two were delivered with the others to follow.

So what’s right for you and your enterprise?

There’s no single answer to that question that fits every situation but there are options to suit all circumstances and requirements.  It is the case though that vehicle finance access to brand new vehicles is not out of reach, even for the newest of start up businesses, with the image, reliability and predictability that these provide.

Access to brand new vehicles is not out of reach, even for the newest of start up businesses, with the image, reliability and predictability that these provide.  Seek expert help from a specialist and you’ll increase your chances!

Vehicle Finance thoughts from Yorkshire Powerhouse
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