Using a vehicle for your business can add a lot of value, especially for enterprises in the transportation niche, with vehicles being the fundamental aspect of the business. Applying for a commercial loan can let you take advantage of discounts on vehicle purchases for business and special offers when you opt for a commercial vehicle loan.
Most people are not are aware of commercial vehicle loans, although it is such as home loans, personal loans, business loans, and vehicle loans are well known.
What are Commercial Loans?
Commercial vehicle loans are loans that are sanctioned to purchase a vehicle that will be used commercially or for business purposes. It is a useful scheme for transportation businesses and small business owners who need financing to buy vehicles to continue operating. These loans are usually applied by proprietorship firms, partnership firms, societies, or even individuals and self-employed businessmen. All these are usually engaged in the transportation industry. The commercial loans are not limited to auto rickshaws and taxi cars; they also include buses, transit mixers, matador vans, or other light or heavy commercial vehicles. NBFCs like us, Fullerton India, provide great commercial vehicle loan options.
Based on the type and usage of vehicles, there are three different kinds of commercial vehicle loans.
- Loan for New Vehicle: This loan is offered to purchase brand new vehicles, just as the title suggests. The loan schemes usually cover the full base value of the vehicles. Some may even offer additional funds that can be used for body construction which is necessary for trucks and mixers widely used in the transportation industry.
- Loan for Old Vehicles: This loan provides funds for businesses looking to buy pre-owned or used vehicles. The loan schemes made available are usually for vehicles that are fifteen years old at the most. Old vehicle loans are the best when purchasing a fleet of used commercial vehicles at good rates. These loans usually cover about 90% of the value of the vehicles.
- Refinancing of Commercial Vehicles: If the business or the enterprise finds better interest rate options, this process can transfer the existing loan from the present lender to a different lender. Refinancing also implies availing of extra credit on the existing loan.
Now, let’s have an idea about what are the important things which everyone has to check when availing of commercial loans.
In many cases, the borrower’s fault on a commercial vehicle loan and the lender is stuck with a vehicle that they have no use for, and heavy-duty machinery has low resale value. Thus with the higher risk involved, there is a higher amount of scrutiny by lenders. Hence, borrowers must have to note and check some important things before applying for a vehicle loan.
Things to Note While Availing of Commercial Vehicle Loan
The borrower must understand all the procedures involved when applying for a commercial loan, such as providing the necessary documents after filling the application appropriately. The documents include proof of address, proof of experience in the niche, a record of past loans, and bank statements in the last six months. Other important documents that will be asked later in the process are income tax returns for the past two years, profit and loss statements, and audited balance sheets, along with the copies of RC of presently owned vehicles, if any.
Commercial vehicle loans can be applied by partners in a partnership firm, directors in private companies and, individuals and co-applicants. The minimum loan amount that can be sanctioned is Rupees 1 lakh for individuals, and for large corporate companies, the loan amount can go up to Rupees 5 Crores.
Loan Tenure and Loan Amount
The principal loan amount may vary depending on the applicant and the specific requirement. The loan amount sanctioned will be directly disbursed to the vehicle dealers and not the borrower. The loan tenure ranges from six to sixty months.
The interest rates for commercial vehicles loans usually range from 10% to 15% based on the applicant and the type of vehicle. It also depends on the number of vehicles owned by the borrower, the business turnover, etc.
Additional Read: Know The Basics of GST and Protect Your Small Business
You should carefully list out the number of commercial vehicle loan offers and choose wisely. Those factors will serve you as a guide when deciding on the best commercial loan options.