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Tips for entrepreneurs wanting to finance a new car

Tips for entrepreneurs wanting to finance a new car

If you are running a business or thinking about starting one, something you need to prepare yourself for is the challenges of being able to secure financing for major purchases like equipment and a new vehicle.

The majority of auto loan providers in Canada are set up to underwrite loans for borrowers that work conventional jobs and have a predictable source of income.

Entrepreneurs do not have a stable income; it fluctuates, which is something that makes lenders nervous.

Obstacles to overcome when trying to secure a car loan in Welland

Prospective lenders will want to know if your business is a sole proprietorship, incorporated, or partnership.

Most entrepreneurs in Canada start off as sole proprietorships and go from there. Being a sole proprietorship is the simplest legal structure but also the riskiest because you are fully liable for all of the debts the business incurs.

Something that most entrepreneurs do is self-finance using their credit cards and lines of credit.

This is the easiest way to access working capital but also the most expensive. In addition, as you take on new debt, your credit utilization rate increases which could push down your credit score, making it harder to secure a loan.

This debt also impacts your cash flow because instead of using the cash flow to grow your business, you must use it to service your debt.

While it may seem impossible at first, do everything you can to reduce the amount of business debt you incur, it will make your life easier over the long term.

Documenting your income

The next challenge you will face when you try to secure auto financing as an entrepreneur is being able to substantiate your income.

Since you don’t have an employer that can give you a “payslip,” what you will need to do is prepare a consolidated financial report which has a copy of your banking statements for the last year and your income tax assessments for the last two years.

The information contained in these documents will help the prospective lender average out your monthly income; this is a figure they need when trying to determine whether a person is earning enough money to qualify for the car loan.

The current maximum debt-to-income ratio that lenders will accept is forty percent, but that could change, so it’s important to keep your debt at a manageable level.

Securing the best terms on a new car loan in Welland

If you are ready to move ahead with your decision to buy a new car, you must seek professional advice from a dealership in your area.

The local dealership will be able to shop the market and select the lender that will provide you with the best car loan based on your situation.

These dealerships have a considerable amount of experience helping self-employed Canadians just like you get the auto financing they need, so be sure to head on over to your local dealership now and start reviewing your options.

When you’re ready for a car lease or loan, get in touch with the Welland auto loan experts at Northway Ford for great deals on auto finance.

Categories: Car Loan

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