Business Car Loans with Bad Credit

Business car loans can be a great way to purchase a company car, but if your business' credit score is poor, you may have trouble finding that loan. It is often difficult to find a bad credit car loan, and even if you do find one for your business the car loan rates will be high in order to offset the risk of lending to a client with bad credit. If your business is in this situation, you may be able to find a loan more easily by backing the loan with a personal guaranty. This article will help give you a basic understanding of business car loans with bad credit.

Business car loans are essentially the same as a regular auto loan: the business takes a loan from a lender to purchase a car and repays it with interest over a set period of time. When a business takes out an auto loan, it is the business' credit that is checked rather than that of an individual. As with any other loan, of course, the business' credit score plays an important factor in ease of finding a loan as well as the terms of said loan.

If the business which is trying to get a car loan has a poor credit history, or if they are a new business which has not yet built credit, it is possible to secure a loan with a personal guaranty. A personal guaranty is similar to a cosigning on a student loan in that an individual agrees to be secondarily responsible for the repayment of the loan. In both cases, it is the credit of the person giving the personal guaranty or of the cosigner which matters.

Bad credit loans are generally not thought of as advantageous, and with good reason: high rates and severe penalties make bad credit loans a thing to avoid if possible. However, getting a bad credit business car loan can also be thought of as an opportunity. Repaying a car loan responsibly can help to build the business' credit back up over time. A poor credit score can be rebuilt in only a couple of years or less, at which point the business is free to refinance and will have a much easier time finding loans in the future.

If your business needs to find a bad credit car loan, it needs to begin by finding a lender. Depending on what type of business it is, it may be best served by a bank, credit union or captive finance company. The phonebook, Internet or dealership at which your business is purchasing the car can help your business find lenders to contact. Whichever lender you choose can then guide you through the approval process.

Although having poor credit is never ideal, taking out a loan with the backing of a personal guaranty and repaying it as promised can both get your business a car and help it to repair its credit.