I need to lease a vehicle but my company has been trading less than a year.

New business owner asks:

I really need to lease a vehicle for my business, but I’ve only been trading for eleven months so I don’t have any accounts to provide to a finance company. What are my options?

Acumenica answers:

It’s actually not that difficult. Most leasing brokers will be able to help you with this. Crucially though, you need to understand that you will almost certainly be required to put up a personal guarantee (PG) so you’ll need to have a strong personal credit history. A PG means that if your company fails to make the payments, then you will be required to meet the obligations personally. 

You might also find that the terms and rates aren’t as attractive, as the risk is seen as being greater. If this is the case, you’ll want to avoid being tied in to a long term lease. Try to keep the term of the lease to around twelve months so that when it comes to renew, you’ll have accounts and an additional year’s trading history and will probably be in a position to negotiate better rates. 

This can be expensive in the short term but in the long term will likely work out better for you. But, as in most things financial, you need to strike a balance. As you’re in the early stages of your business, cash flow may be limited and so paying a higher rate, even short-term, might not be a viable option.

As always, speak to your accountant or trusted business adviser if you’re unsure about these matters.