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Maintaining a fleet of business vehicles or trucks can present a financial challenge for your company. In addition to the initial purchase price, you must consider ongoing expenses related to regular maintenance, unexpected repairs, fuel, insurance, registration, and taxes. These costs can add up and impact your company’s bottom line. That’s where fleet financing comes in.
Fleet financing is used by companies in countless industries that use more than five vehicles. With this option, you get funding to finance new or used business vehicles or trucks, expand your fleet, and make payments over a convenient term. Fleet financing helps preserve your company’s cash flow, boosts your purchasing power, and might present you with tax benefits. This Balboa Capital blog post features an overview of fleet financing, including how it works, how to choose a lender, and more.
Benefits of fleet financing.
Businesses in countless industries rely on commercial vehicles, trucks, and vans to keep their operations moving. These include companies in construction, transportation/logistics, landscaping, healthcare, retail, and food and beverage services. When businesses need to invest in multiple vehicles simultaneously, they often lack adequate financial resources to make a large cash purchase.
By leveraging fleet financing, business owners can acquire the necessary vehicles or trucks without depleting their cash reserves or taking out a long-term business loan. Furthermore, fleet financing offers qualified businesses the opportunity to borrow more significant amounts. This allows companies to maintain a modern, reliable fleet that sustains business growth and meets customer/client demands.
Fleet financing comes with flexible term options, enabling companies to tailor repayment schedules to their cash flow patterns. The cost savings of financing can help businesses preserve capital and credit lines for other investments and daily operational needs.
Fleet financing and business taxes.
Fleet financing comes with tax advantages. The monthly finance payments are often tax-deductible under Section 179, potentially reducing your company’s overall tax burden and boosting its bottom line. The Section 179 tax deduction applies to work and specialty vehicles used for business purposes. These include cargo vans, box trucks, heavy SUVs and pickup trucks, and specialized vehicles (e.g., dump trucks, shuttle vehicles, and tractors).
Every business’s financial and tax situation differs, so you should consult an accountant to determine if you can deduct all or part of your fleet’s finance payments. Your accountant will also need to assist you in electing Section 179 and completing IRS Form 4562 when you file your business taxes.
How fleet financing works.
Fleet financing, also known as equipment financing, is a simple option if you are aiming to expand your fleet. It involves securing funding to finance multiple vehicles at once, leading to potential cost savings compared to financing each vehicle individually.
When you finance a fleet, you will make monthly payments (principal plus interest) over a predetermined term outlined in the agreement. The borrowing requirements will vary based on the lender you select, but there are three factors that lenders look at when reviewing your application.
These are your business’s credit score, annual revenues, and time in business. If your company has a good credit score, robust revenues, and has been operating for several years (or longer), you have a higher chance of being approved for funding.
Choosing a fleet financing lender.
When it comes to fleet financing, choosing the right lender can make all the difference for your business. Banks and credit unions offer traditional lending options such as term loans, and specialized business lenders provide equipment financing solutions.
Balboa Capital, for example, understands the unique challenges of fleet management and can tailor the right solution to your immediate and long-term needs. Plus, we work with commercial vehicle vendors nationwide and can help facilitate fleet transactions quickly.
Consider comparing fleet financing offers from several lenders to find the best fit. Look at factors like interest rates, repayment terms, and additional services provided. Remember, the most affordable option isn’t always the best – choose a lender that understands your industry and can support your company’s growth.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.