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Everything You Need to Know About Car Loans For New ABN Holders

Sep 15, 2021 1:46:55 PM
Great to see that you’re a small business owner and new to borrowing in that business, however obtaining finance for a new work vehicle can be a challenge for new ABN holders, here's why.
Car loans for new ABN holders
EDU Australia estimates that one in three new small businesses fail inside of the first year and according to the Australian Bureau of Statistics, more than 60 per cent of small businesses stop their operation within the first three years of their startup journey. 
That's a pretty scary statistic and it's these statistics that make finance companies nervous about lending to young businesses. 
To offset those nerves lenders are always looking for ways to mitigate the risk of giving a loan out that may never be repaid. 
Often car loans for new ABN holders are declined because of the following reasons. 
  1. ABN length -  By ABN length we mean length of trading. If your trading history is too short or cannot demonstrate stability, continuation or financials you may be declined.

  2. No GST registration - While not being registered for GST is not a roadblock, it generally only affects how much the lender will lend.  Most lenders won't go over 40k if you are non-GST registered

  3. No or low cash flow/turnover - Businesses that want to borrow funds but don't have enough income turning over may struggle to demonstrate capacity or affordability. 

  4. Business in strike off or liquidation - This simply means that if your business is in the process of being deregistered by ASIC or is currently in liquidation 

  5. Poor Banking conduct - This basically refers to your financial history with regard to managing your finances. Like all loan applications, your credit history will be checked. Dishonours, late fees, and low running balances can significantly impact your chances of getting approved. 
So how do you qualify for a car loan as a new ABN holder with a limited trading history? The answer is to apply for a low doc car loan. They are designed for new businesses just like yours and as the name suggests require limited paperwork. 
Ready to get your first business car loan as an ABN holder? Follow our tips below to mitigate risk to the lender and maximise your chances of getting approved. 

ABN holder car finance - 6 tips to help you qualify

ABN holder car finance

1. Save a deposit

There are many ways that you can mitigate risk to the lender and the easiest is to show that there is a level of deposit that’s coming off the vehicle. When lenders can see that they can have some skin in the game from you it increases your chances of getting approved. 

2. Have anchors

Another great way is to have anchors. What we mean by anchors is something that ties you down to being a stable, mature and responsible person. Things such as property or long-term trading history, even if it was in a different business, signify to lenders a level of maturity that builds their confidence in your ability to service the loan.
For those businesses that have only just started and are looking to understand what the best practices are to be able to get a loan in the short future we highly recommend taking the following actions.

3. Separate your business and personal banking

It’s always great to have a business account that hasn’t got your personal transactions in it because most lenders are going to ask for a copy of this account to see that there is money going through your business

4. Register for GST

Register for GST as soon as possible. The fact that you’re registered for GST tells finance companies that you’re likely earning over $75,000 a year or at least turning over more than $75,000 in a 12 month period.  This helps prove affordability in a low doc situation

5. Manage your banking

Try not to draw all of the money out of your bank in cash. Rather use your business banking account as a proper trading account. There is nothing wrong with spending all of the money which comes into your account but it is much more comforting for finance companies to see that it’s actually a trading business and that there is money going in and out.

6. Choose a work vehicle

Choose a vehicle which has got a good work purpose, i.e. that vehicle is income-producing, whether it be a utility or van to cart good’s around or a business sedan to drive to and from appointments. 

The Takeaway for ABN holders

The most common reason that ABN Loans are declined is that the business hasn’t been trading for long enough or can’t show that it has trading income.
Financials are not mandatory and most finance companies understand that business owners are slow to complete the tax returns, however, they do want to know that the business has been running for a period of time and it’s got money turning through the bank.
If you’ve been recently declined please separate your accounts, turn over the money within that business account and re-apply for a low doc car loan with us in 90 days. Alternatively,  if you are a brand new ABN holder wait until your business has a minimum of six months of operations before reapplying.  
At Ausloans we work for you, not the banks, and have specialist lenders to help new ABN holders with low doc loans. Need to learn more check out our car loans guide
low docs abn holders car finance

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