For those having recently started a new business and looking to lease a car, you may be wondering what credit requirements you will need.
When leasing a car, regardless if it’s a personal lease or via your new business, you will have to complete a credit check. This is because the finance provider will need to know you can afford the payments and see that you are likely to make them, so they will need to check the business’s credit history. If it is a new company, then they may check the director’s history too. A company credit check will show the history of the business, past payment history, company operational data, business registration information from Companies House, annual returns, and public filings for insolvency, CCJ’s and legal filings.
When determining eligibility, your credit score will be assessed automatically. Then depending on the strength of the credit score, the provider may want to see the following: audited accounts showing a healthy profit margin or a signed accountant’s letter confirming net profits and dividends paid for the last few years, bank statements that prove a positive net worth from the last three months, addresses and identification for the directors, such as a passport, drivers license and/or utility bills as proof of address, and ideally a balance sheet. You may not be asked for all of the above but be prepared to produce any when asked as failure to do so will likely result in being declined.
If your business is a new start-up, then it can be more difficult to get a car lease through the business as it will have no history to show profitability, and finance houses are not keen on lending to a company that hasn’t shown it will last or that it can make a solid profit to cover the monthly repayments. In this case a credit check will likely be carried out on the directors. If this shows a strong credit history, then the chances are they will ask for a Directors Personal Guarantee. This is where the director promises to take on the monthly payments should the business fail to make them, and counts as an extra backup with the directors effectively underwriting the loan and showing they have confidence in the business. Giving a Directors guarantee will greatly increase your chances of being approved, but if the directors themselves have a poor credit history too, then you could still be declined.
Agreeing to a larger initial up-front payment can help as it reduces the risk to the finance house of the business defaulting on payments. If you have poor credit you may find a finance provider that specialises on customers with a low credit score or existing county court judgements against them (CCJ’s), though expect to pay far more each month than those with a strong credit history.
An experienced leasing broker will have in-depth knowledge of the above and will have guided hundreds of businesses through the process, making it simple for you. If you’re in the UK and considering business leasing, check out one of the larger websites like Orangewheels Leasing to see what the expected monthly costs are likely to be, and pick up further advice on the application process.
