Commercial Vehicle Loans For Small Business Loans: Here’s All You Need To Know

If you are a small business owner who needs a commercial vehicle but doesn’t want to spend your cash reserves on purchasing it, applying for a commercial vehicle loan makes perfect sense.

As a business owner, there is always a need for commercial vehicles to transport goods, people and to run errands.  If you’re a small business owner who needs more information on commercial vehicle loans and how to apply for them, then read on to know more.

What Is A Commercial Vehicle Loan?

A commercial vehicle loan is funding from a lender that is used to purchase vehicles for your business. You are required to pay back the loan amount, which includes the principal and interest, in monthly installments. Commercial vehicle loan terms typically are for 5 years but depend on loan requirements.

How To Apply For A Commercial Vehicle Loan?

When applying for a commercial vehicle loan, you will be asked to produce a list of documents.

Here is the list of documents that lenders usually require:

  • Duly filled application form with attached photograph
  • 2 passport-size photographs
  • A cheque for processing fee

KYC documents

  • Age proof- Aadhaar Card/PAN Card/Voter’s ID card/Driving License/Passport (Any one)
  • Identity proof- Aadhaar Card/Voter’s ID card/Driving License/Passport (Any one)
  • Residence proof- Rental agreement/Voter’s ID Card/Passport/Ration card/Tel bill or Elec. Bill/Trade License/ Sales Tax Certificate (Any one)
  • Signature verification proof-Driving License/PAN Card/Registered Sale Deed/Govt. ID Card (For Govt. employees) (Any one)

Income proof

  • Salary Slip of last 3 months
  • Past 6 months bank statement
  • Form No.16
  • Updated ITR for last 2 years
  • Photocopy of official ID

Other Documents 

  • Existing vehicle ownership proof
  • Vehicle details & valuation report
  • Insurance and RC copy of the vehicle
  • Fleet list details
  • Trade references
  • Property ownership proof (In case of farmers)
  • Proprietorship decl., partnership deed, (MOA/AOA), board resolution & 2 years audited financials (In case of Private/Limited companies, partnership firms, trusts & societies)
  • Loan repayment track (if any)

Commercial Vehicle Loan Rates and Terms

The majority of lenders usually offer you up to 100% of the vehicle’s value as the loan amount. But to get the best commercial vehicle loan interest rates, you must have a strong credit history and a proven track record of financial responsibility.

Commercial vehicle loans usually come with a payment timeline ranging from 1 year- 5 years, where you will need to make timely monthly payments.

If you have an impressive credit score, you will get a lower interest rate on a commercial vehicle loan. But if you are struggling with a low business/personal credit score, you would need to sign a personal guarantee.

Some lenders charge an application fee or down payment, and if your business has to put a down payment, it will be 10% of the vehicle’s cost.

Must Read: 5 Major Factors That Affect Your Bike Loan EMI

Benefits of Commercial Vehicle Loans

Commercial vehicle loans are among the most preferred loans for small business owners who want to buy their first commercial vehicle or add a new one to their existing fleet.

Here are some amazing benefits of commercial vehicle loans:

  • Easy repayment tenure- The repayment tenure is usually up to 5 years, ensuring a low EMI amount for the borrower.
  • Variety of vehicle financing- You can get funding for a huge variety of vehicles like trucks, buses, tippers, trailers, tankers, and other light commercial vehicles.
  • Quick and easy processing- The entire process of availing a commercial vehicle loan is fast and convenient. Banks will normally take up to 4-5 days to process a new/ used vehicle loan application after the documents are submitted.

Bottom Line

Every growing business will need to buy a commercial vehicle at some point or the other. Before you apply for a commercial vehicle loan, it is very important to know the requirements and commercial vehicle loan interest rates for a hassle-free experience.