Finance for commercial vehicle with bad credit

Finance for Commercial Vehicles with Bad Credit

Obtaining finance for a commercial vehicle can be a crucial step in growing or maintaining your business. Whether you are a sole trader, small business owner, or part of a larger enterprise, access to reliable vehicles is often key to delivering goods or services. However, if you have a poor credit history, securing the necessary finance can be challenging. The good news is that despite bad credit, you still have options available to help you finance your commercial vehicle.

In this article, we’ll explore how to navigate the world of commercial vehicle finance when you have bad credit, provide tips for improving your chances of approval, and explain how brokers like Kandoo can assist you in finding the best deals available.

Understanding Commercial Vehicle Finance

Before diving into the specifics of bad credit vehicle finance, it’s important to understand what commercial vehicle finance is. Essentially, it refers to a range of financial products that allow businesses to purchase or lease vehicles for commercial purposes. These vehicles can range from small vans and trucks to larger lorries or specialised vehicles, depending on your business needs.

Most commercial vehicle finance options work similarly to personal vehicle finance. You will typically make monthly payments over a fixed term, at the end of which you may either own the vehicle outright, return it, or upgrade to a newer model. The terms of your agreement will depend on the type of finance you choose and your creditworthiness.

How Bad Credit Affects Your Ability to Secure Finance

Bad credit can make securing finance for a commercial vehicle more difficult, but it doesn’t make it impossible. Lenders use credit scores to assess the risk of lending money to an individual or business. If you have a history of missed payments, defaults, or bankruptcies, lenders may view you as a higher risk, meaning they may be less willing to approve your application or may offer less favourable terms (such as higher interest rates).

However, it’s important to remember that different lenders have different criteria when it comes to assessing creditworthiness. While some may refuse to work with applicants who have bad credit, others specialise in offering finance to individuals and businesses in this situation.

Types of Finance Available for Commercial Vehicles

There are several types of finance available for commercial vehicles, even if you have bad credit. The right option for you will depend on your specific needs, financial situation, and the terms offered by lenders. Below are some of the most common options:

1. Hire Purchase (HP)

Hire Purchase is one of the most straightforward ways to finance a commercial vehicle. With HP, you pay an initial deposit followed by fixed monthly payments over a set period (usually between 12 and 60 months). Once all payments have been made, you own the vehicle outright.

For those with bad credit, HP can be a more accessible option because the vehicle itself serves as collateral for the loan. This means that if you default on your payments, the lender can repossess the vehicle. However, it also means that lenders may be more willing to approve your application despite a poor credit history.

2. Finance Lease

A finance lease is another option for financing a commercial vehicle. With this type of agreement, you pay a fixed monthly amount to lease the vehicle for a set period. At the end of the term, you can either continue leasing the vehicle, return it, or sell it on behalf of the leasing company and retain a portion of the sale price.

A finance lease can be a good option for businesses with bad credit because the vehicle remains the property of the lender throughout the lease term, reducing their risk. Additionally, finance leases can offer more flexibility compared to other types of finance, as you may have lower monthly payments or be able to negotiate different terms based on your needs.

3. Contract Hire

Contract hire is a form of leasing where you pay a monthly fee to use the vehicle for a set period, typically between 2 to 5 years. At the end of the contract, you return the vehicle to the lender, with no option to purchase it. This can be a good option for businesses that want to avoid the long-term commitment of owning a vehicle or those who prefer to upgrade their fleet regularly.

While contract hire may be more difficult to obtain with bad credit, some lenders specialise in offering this type of finance to businesses with less-than-perfect credit histories. It’s worth exploring your options if you prefer leasing to ownership.

4. Personal Contract Purchase (PCP)

Personal Contract Purchase (PCP) is similar to HP, but with a key difference. At the end of the PCP term, you have the option to either return the vehicle, make a final “balloon payment” to own it outright, or trade it in for a newer model.

PCP can be a good option if you’re looking for lower monthly payments, as these tend to be lower than HP payments. However, the balloon payment at the end of the term can be substantial, so it’s important to factor this into your long-term financial planning. For those with bad credit, securing PCP finance may be more difficult, but not impossible, particularly if you work with a broker like Kandoo to find the right lender.

Tips for Improving Your Chances of Approval

While having bad credit can limit your options, there are steps you can take to improve your chances of securing finance for a commercial vehicle. Below are some tips to help you boost your application and increase the likelihood of approval:

1. Check Your Credit Report

Before applying for any type of finance, it’s a good idea to check your credit report. This will give you an idea of your current credit standing and allow you to identify any errors or discrepancies that may be dragging your score down. In the UK, you can access your credit report from agencies like Experian, Equifax, or TransUnion.

2. Consider a Larger Deposit

If possible, offering a larger deposit can improve your chances of being approved for finance. A larger deposit reduces the amount you need to borrow, which in turn reduces the lender’s risk. This can make them more willing to approve your application, even if you have bad credit.

3. Demonstrate Business Stability

Lenders are more likely to approve finance for businesses that demonstrate stability and profitability. Providing evidence of steady cash flow, a solid business plan, and a history of timely payments on other financial obligations can help strengthen your application.

4. Work with a Broker

Working with a finance broker like Kandoo can significantly improve your chances of securing commercial vehicle finance, even if you have bad credit. Brokers have access to a wide range of lenders, including those who specialise in bad credit finance. They can help match you with the best lender for your specific situation, potentially saving you time, money, and stress.

5. Consider a Guarantor

If you’re struggling to secure finance on your own, you may be able to improve your chances by offering a guarantor. A guarantor is someone who agrees to make the payments if you are unable to. Having a guarantor with a strong credit history can reassure lenders and increase the likelihood of approval.

How Kandoo Can Help

Navigating the world of commercial vehicle finance can be daunting, especially if you have bad credit. That’s where a broker like Kandoo can be invaluable. Kandoo is a UK-based retail finance broker that specialises in helping individuals and businesses find the right finance solutions, regardless of their credit history.

Here’s how Kandoo can assist you:

1. Access to Multiple Lenders

Kandoo works with a wide network of lenders, including those who specialise in offering finance to individuals and businesses with bad credit. By working with Kandoo, you can increase your chances of finding a lender who is willing to work with you, even if your credit score isn’t perfect.

2. Tailored Solutions

Every business is unique, and Kandoo understands that a one-size-fits-all approach doesn’t work when it comes to finance. Their team of experts will work with you to understand your business needs and financial situation, helping you find a finance solution that fits.

3. Time-Saving

Applying for finance can be time-consuming, especially if you’re trying to navigate the market on your own. Kandoo streamlines the process by doing the legwork for you. They’ll compare options from multiple lenders and present you with the best deals, saving you time and effort.

4. Expert Advice

Kandoo’s team of finance experts can provide you with guidance throughout the application process. Whether you need help understanding the terms of a finance agreement or advice on improving your credit score, Kandoo is there to support you every step of the way.

Final Thoughts

Securing finance for a commercial vehicle with bad credit can be challenging, but it’s not impossible. By exploring your options, improving your credit where possible, and working with a reputable broker like Kandoo, you can increase your chances of finding a finance solution that works for you.

Whether you opt for hire purchase, a finance lease, or another type of finance, having access to the right vehicle is essential for keeping your business moving forward. With the right support and a bit of preparation, you can overcome the hurdles of bad credit and secure the commercial vehicle finance you need to succeed.