The deposit amount required for a business loan will depend on the type of loan you require. Having a deposit can strengthen your application by showing good money management and decrease the overall loan amount so mean you are repaying less over the term of your loan.
Deposit for commercial vehicle finance
Commercial vehicle finance deposits will vary from lender to lender. Some lenders will offer no deposit and some require 10% to 20% deposit. We are partnered with multiple vehicle finance lenders and can find our clients a suitable lender for their business situation. The deposit amount and credit history will determine which lenders we apply with as each lender has different minimum requirements.
With commercial vehicle finance the loan is secured against the vehicle itself. In some cases additional security may be required to top-up the loan agreement, for example, a truck is purchased with no deposit and the truck is an older model so the resale value is lower so a lender may want to include another vehicle valued at $10k-$15k to top-up the agreement.
Deposit for starting a business or buying a business
The required deposit for buying a business is between 30%-50% of the sale price. So if you are purchasing a business for $100k you will need between $30k – $50k in a cash deposit to successfully secure a loan for the extra $50k – $70k. A deposit for buying a business shows responsible money management and is an important contribution to a business purchase.
The remaining amount of the loan will need to be secured against personal assets such as vehicles or property. Depending on the type of business being purchased some of the business assets themselves could be used as security.
When starting a business the deposit amount is the same, 30%-50% of the startup price is needed to contribute to getting the business going. The deposit demonstrates your money management and lowers the risk for the lender. There is no financial history to assess with a startup business so showing you are good with money is an important part of the application requirements.
Deposit for buying business equipment
You do not necessarily need a deposit for purchasing business equipment however it can help your applications success and means you are borrowing less. You could apply for an unsecured loan or a secured loan depending on what was easiest for you, how soon you need the funds and what the price of the equipment is. An unsecured loan is usually quicker to have approved and no deposit is required. In general your interest rate will be a little higher with an unsecured loan however because there is more risk.
If you are purchasing equipment such as a freezer for your food goods store and it is valued at $15k you could apply for a no deposit secured loan, using the freezer as security. Depending on the lender used additional security may be required which could be a vehicle or other business asset.