Part of: Van Finance
New and start up businesses
Van finance for new and start up businesses
A short trading history narrows the field, but it does not close it. This page explains how lenders approach new businesses and how to put your case well.
- An enquiry, not an application
- New and used vans
- Ownership and VAT explained
Most lenders like to see a business with two or three years of accounts. New businesses do not have them, so lenders lean on other evidence: the experience of the people involved, their personal credit history, any deposit, the van itself and a believable plan for the work it will do.
That means preparation matters more for a start up than for an established firm. A clear explanation of where the work will come from, supported by contracts, quotes or a previous employment record in the same trade, can make a real difference to how your case is read.
This page applies whether you have just incorporated a company, registered as a sole trader or formed a partnership. Where the structure changes the answer, we say so.
Who this suits
This page is for businesses that are newly formed or have only a short trading record. A common example is someone who has worked in a trade for years as an employee and now wants their own van to work for themselves.
- Newly incorporated limited companies with no filed accounts yet
- Sole traders in their first year or two of self employment
- Experienced tradespeople moving from employment to running their own business
- Established people starting a second, separate business
- Businesses that have changed structure, for example from sole trader to limited company
What lenders look at
With little business history to review, lenders look at the people. A director or owner with a clean personal credit file, a stable address history and a track record in the same industry is a stronger applicant than one without those things, even if the business is the same age.
Lenders also consider how much risk they are taking on the van. A deposit reduces the amount borrowed. A van that holds its value and is not too old at the end of the term gives the lender more comfort. Some lenders will ask for a guarantor or a director's personal guarantee.
- Personal credit history of the owner, partners or directors
- Experience in the trade, and whether the new business continues that work
- Evidence of upcoming work, such as contracts, a subcontract or quotes
- Deposit or part exchange available
- Homeowner status, which some lenders weigh in your favour
- The van's age, mileage and expected value at the end of the agreement
What you will need
A new business needs to tell a short, clear story. These items help.
- Business details, the start date and the structure you trade under
- A short summary of your experience in the trade
- Any contracts, letters of intent or regular customers lined up
- Personal bank statements and, once opened, business bank statements
- Photo ID and proof of address for each person involved
- Details of the van, the supplier and any deposit
- For a company, the registration number and director details
Typical structure
New businesses most often use hire purchase. It is the structure lenders are most comfortable offering to a start up, because the van is the security and ownership passes at the end. Lenders may ask for a deposit, may prefer a shorter term, and may set tighter limits on the age of the van.
Lease purchase with a balloon can bring payments down in the early months, when cash flow is often tight. The trade off is a larger sum at the end, so only take a balloon if you can see how it will be paid. Finance leases are offered to new businesses less often.
For VAT, timing matters. If you are not yet VAT registered, you may not be able to reclaim VAT paid on a van bought before registration in the usual way. There are rules on reclaiming VAT on goods bought before registration, so speak to your accountant before you buy.
Deposits and guarantees
For many start ups, a deposit is the single biggest factor within your control. It reduces the amount the lender is exposed to and shows commitment. The right amount depends on the lender and the van, and we will not quote a figure without knowing your case.
Where the business is a limited company, lenders will often ask the directors for a personal guarantee. For sole traders the agreement is already personal. In some cases a lender may ask for an additional guarantor. Each is a significant commitment, so understand it fully before you agree.
If you have been declined before
An earlier decline is useful information. Ask the lender, where possible, what drove the decision, and check your credit file for anything you did not expect. Then talk to us before applying elsewhere so we can approach lenders whose criteria suit the reason rather than adding more searches to your file.
Common mistakes
New businesses can avoid most of these with a little preparation.
- Applying before the business bank account is open and running.
- Leaving your personal credit file unchecked, when it is the main thing lenders will read.
- Choosing a high value or older van that falls outside new business criteria.
- Not mentioning previous experience in the trade, which is often your strongest point.
- Taking a balloon to make the numbers work without a plan for the end.
- Making several applications at once after an early decline.
Sole traders and partnerships
If you are a sole trader, a partnership of two or three partners, or an unincorporated body, some finance agreements may be regulated under the Consumer Credit Act 1974. A regulated agreement carries extra protections and different paperwork. Whether yours is regulated depends on the amount borrowed, the purpose and any exemptions that apply. We will tell you before you proceed, and the lender will confirm it in the agreement.
Questions we are asked
Can a brand new business get van finance?
Yes, with some lenders. They rely more on the people involved, their credit history and experience, any deposit and the van itself. There are fewer options than for established businesses.
Do I need a deposit as a new business?
Often, though not always. A deposit reduces the amount borrowed and can widen the lenders available. The amount depends on the lender and your circumstances.
Does my experience as an employee count?
It can help a great deal. Lenders take comfort from years spent in the same trade, especially if your new business continues that work.
Will I need a personal guarantee?
For a new limited company, lenders commonly ask directors for one. For sole traders, the agreement is already personal. A separate guarantor is sometimes requested.
Can I reclaim VAT on a van bought before I registered for VAT?
There are rules that may allow some VAT on goods bought before registration to be reclaimed, subject to conditions. Check with your accountant before you buy.
Should a start up use HP or a lease?
Hire purchase is the structure most lenders offer new businesses. A finance lease is available less often. Our comparison guide explains both.
Related van finance guides
Your business circumstances
Compare finance structures
Choose your van
This page is general information, not tax, accounting or legal advice. Tax and VAT treatment depends on your circumstances and can change. Speak to your accountant before choosing a structure. Finance is subject to status and lender approval.
Who you are dealing with
A broker, regulated, and clear about it
Sorbus Finance Limited is an appointed representative of Moorgate Finance Limited, which is authorised and regulated by the Financial Conduct Authority (firm reference number 662419). We are a credit broker, not a lender.
We work with a panel of lenders that includes high street banks, specialist asset finance lenders and manufacturer linked finance houses. Each has its own criteria, so part of our work is matching your business to the lenders likely to say yes, rather than applying everywhere.
Not all commercial finance activities or agreements are regulated by the Financial Conduct Authority. Regulatory protections depend on the activity, agreement and customer circumstances.