Business Van Finance

Why use business van finance?

Commercial vehicles can become essential assets for many UK businesses, and applying for van finance means you can purchase what you need without dipping into your working capital or cash reserves.

Whether you need to secure a delivery van for your small business or lease an entire commercial fleet, by spreading the cost of your purchase, you can keep your cash flow healthy for daily operational costs.

Benefits of business van finance

• Preserve cash flow. Spreading large vehicle costs over several monthly payments protects your cash flow.
• Access top-of-the-range vehicles. Use finance to purchase vehicles that might have been otherwise out of your price range; for example, you can upgrade your fleet to low-emission vehicles.
• Tax efficiency. You can usually claim capital allowances or offset monthly interest payments against your taxable profits.
• Grow your business faster. After securing your vehicle, you can confidently take on bigger jobs or expand your service area.

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Business loans vs asset finance

To choose the best option for your business, here are some differences between the two:

Unsecured business loan

• You own the van outright from day one
• You can use the loan to buy any vehicle you want
• The loan can cover both purchasing and leasing costs

Asset finance (HP/PCP)

• Your vehicle acts as the security
• Typically requires a deposit
• There’s an option to keep or return the van

1. Unsecured business loan through Capalona

A small business loan gives you a lump sum of money into your business bank account. You can spend this however you want, buy a van outright from a dealer or private seller, lease a vehicle, or use it to put down the initial deposit.

Using a business loan to purchase a van means there are no mileage restrictions because it isn’t tied to a lease agreement.

2. Hire Purchase (HP)

With hire purchase (a type of asset finance), the lender purchases the van on your behalf. You then pay the lender back the value in monthly instalments over a pre-agreed term. You don’t become the van’s legal owner until you’ve paid the final option to purchase fee.

You will need to pay an initial deposit, typically 10-20% of the vehicle value. But with fixed monthly instalments, you can budget easily.

3. Personal Contract Purchase (PCP)

Also known as commercial PCP, PCP lessens your monthly payments by deferring a large portion of the van’s total cost to the final payment, called a balloon payment. You can pay the final amount to keep the vehicle, return it, or trade it in for a newer model.

With a PCP agreement, annual mileage caps apply, and if you go over the limit, you have to pay a fee.

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Common reasons business owners apply for van finance

Here are some reasons you might consider van finance.

Upgrading an ageing van

Older vans mean higher repair costs and excessive fuel consumption. By upgrading your fleet, you ensure lower maintenance costs and improved reliability.

Expansion and new contracts

By accepting large contracts, you might need to add vans to your fleet quickly. Making use of business finance enables you to scale quickly to match business demand without depleting working capital.

Meeting environmental regulations

Ultra-low emission zones across the UK mean daily fees for older diesel and petrol vans. By purchasing or leasing a Euro 6-compliant or electric van, you remove these associated costs.

Cover initial leasing costs

If you’re leasing, you usually have to pay a deposit upfront plus lease fees. By applying for a small business loan through Capalona, you can cover these costs easily.

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Business van finance for limited companies (Ltd)

By securing finance through your Ltd company, you separate business liabilities from your personal finances. And you can also take advantage of structured tax benefits and clear balance sheet management, too:

• Tax relief. You can deduct the interest payments on your business loan or monthly lease charges as an allowable business expense. This helps reduce your corporation tax liability.
• Capital allowances. You can claim the Annual Investment Allowance (AIA) if you have hire purchase agreements. This allowance writes off van costs against tax.
• Reclaiming VAT. Registered businesses can usually reclaim 100% of the VAT on a vehicle purchase or monthly payments, if you’re using your van for business purposes only.

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Van finance for new businesses and start-ups

Start-up businesses can struggle to secure finance through traditional high street lenders, but working with alternative lenders makes finance accessible to new businesses with a limited trading history.

How start-ups are eligible for van finance:

• Sign a personal guarantee. As a director, you can sign a personal guarantee, which helps you secure the funding if your trading history is less than a year.
• Proof of cash flow. If you can demonstrate strong cash flow through income statements or secured client contracts, it shows the lender you can comfortably make repayments.
• Provide a large deposit. By parting with a higher deposit, this lessens the lender’s risk.

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Business van finance FAQs

If a van is essential to your business operations but you don’t want to deplete your cash reserves to purchase or lease the van, applying for business van finance could be a good alternative to consider.

Get started now, compare van business loans or apply for asset finance.