Key Takeaways
- Tow truck loans are specialised loans designed to help businesses purchase tow trucks, covering new or used vehicles, repairs, and upgrades.
- Tow truck financing options include chattel mortgages, leasing options, asset-based finance, overdrafts, and invoice finance
- Benefits of tow truck loans include spreading the cost of the tow truck over time and freeing up working capital for other business expenses.
- With the right financing, you can also get tax benefits and access better tow trucks for your business.
- Consult a lending expert like Dark Horse Financial to find the best tow truck financing solution for your business.
There are more than 2,800 businesses in the towing services industry in Australia. The industry has grown over the past 5 years, but revenue is expected to dip slightly this year. If you’re in the towing business, now may be the best time to level up your business and stay ahead of the competition. To do that, you’ll need a lot of capital. That’s where financing comes in. Tow truck loans in Australia enable you to purchase trucks, maintain them, and get funding for other operational expenses to keep your business running smoothly.
Let’s talk about all things tow truck financing, including the types of lending available, how to qualify, and why securing the right financing can be the best move for your business.
What Are Tow Truck Loans in Australia?
Tow truck loans are specialised financial products designed to help businesses purchase tow trucks. These loans can be used to buy new or used tow trucks, as well as to finance repairs, upgrades, or additional equipment. Given the high cost of tow trucks, which can range from $50,000 to over $500,000 (or more) depending on the type and specifications, tow truck financing provides a practical solution for business owners who may not have the upfront capital to make such a significant purchase.
Types of Tow Truck Financing
There are several types of tow truck loans available in Australia, each catering to different business needs and financial situations. Here are the most common options:
Chattel Mortgage
A chattel mortgage is one of the most popular forms of tow truck financing in Australia. With this option, the lender provides the funds to purchase the tow truck, and the vehicle itself serves as security for the loan. This type of financing is particularly attractive because it often comes with flexible repayment terms. Additionally, businesses can claim tax benefits and deduct depreciation and interest expenses, making it a tax-efficient choice.
Leasing Options
Leasing is an excellent option for businesses that want to use a tow truck without purchasing one. With a lease, you make regular payments to use the vehicle over a fixed term. At the end of the lease, you can choose to return the truck, upgrade to a newer model, or purchase it at its residual value. Leasing is ideal for businesses that prefer to avoid ongoing maintenance and want to keep their fleet up-to-date with the latest models.
Asset-Based Loans
Asset-based loans allow you to use existing business assets, such as machinery, vehicles, or equipment, as collateral to secure financing for a tow truck. This type of loan is particularly useful if you also need additional funds for other business purposes. Asset-based loans typically offer competitive interest rates and flexible terms, making them a versatile financing option for businesses with valuable assets.
Overdrafts
An overdraft is a revolving line of credit linked to your business bank account, allowing you to withdraw funds up to an approved limit. While not specifically designed for purchasing tow trucks, an overdraft can provide quick access to cash for smaller expenses, such as repairs, maintenance, or unexpected costs. Overdrafts are a flexible financing option, as you only pay interest on the amount you use. The limit resets as you repay what you borrowed.
Invoice Finance
Invoice finance is a financing solution that allows you to unlock cash tied up in unpaid customer invoices. With this option, a lender advances you a percentage of the invoice value (usually up to 85%), providing immediate working capital. Once your customer pays the invoice, the lender releases the remaining balance, minus fees. While not directly used for purchasing tow trucks, invoice finance can help improve cash flow, making it easier to cover loan repayments or other business expenses related to your towing operations.
Why Choose Tow Truck Financing in Australia?
Here are some reasons why tow truck financing is a smart choice for Australian business owners:
1. Preserve Working Capital
One of the biggest advantages of tow truck loans is that they allow you to preserve your business’s working capital. Instead of paying a large lump sum upfront, you can spread the cost of the tow truck over several years. This means you’ll have more working capital available to cover other business expenses, such as wages, fuel, and maintenance.
2. Tax Benefits
Certain types of tow truck financing, such as chattel mortgages and leasing agreements, offer tax benefits. For example, you may be able to claim depreciation and interest expenses. These tax benefits can help reduce your taxable income and increase savings over the financing term.
3. Flexible Repayment Options
Most tow truck loans in Australia come with flexible repayment options, allowing you to choose a repayment schedule that suits your business’s cash flow. With the help of a qualified loan professional, you can tailor the loan to meet your needs.
4. Access to Better Equipment
With tow truck financing, you can afford to invest in higher-quality tow trucks that may have been out of reach if you were paying cash. This can give your business a competitive edge by allowing you to offer better services to your customers.
How to Qualify for Tow Truck Lending in Australia
Qualifying for tow truck financing in Australia typically involves meeting certain criteria set by the lender. While the specific requirements may vary depending on the lender and the type of loan, here are some common factors that lenders consider:
1. Credit History
Your credit score is an important factor that lenders consider when assessing your application for tow truck loans. Lenders will typically look favourably on scores of 450 and above, though bad credit options are available. A strong credit history demonstrates that you’re financially stable and likely not going to default on your loan.
2. Business Finances
Lenders will typically want proof that your business can service a loan. If you’re purchasing a tow truck, some lenders don’t require income verification for asset purchases below $250,000. As the asset’s value increases, the lender may ask for a read-only view of your business bank statements. For tow trucks above $500,000, most lenders will ask to review full financial documents, including profit and loss statements, balance sheets, bank statements, tax portals, asset and liability statements, and more. Be prepared to provide at 6 months up to 2 years of documentation.
3. Equipment Details
If you’re purchasing a tow truck, the specifics of the asset will matter to lenders. Lenders will look at the age, condition, and value of the asset before approving the loan. There are lenders willing to finance the purchase of both new and old tow trucks. The trick is to find the right lender that has a proven track record of providing the type of financing you’re seeking. (Our team at Dark Horse Financial can help you with this)
Tips for Choosing the Right Tow Truck Loan
With so many tow truck financing options available in Australia, it’s important to choose the right loan for your business. Here are some tips to help you make the best decision:
- Pinpoint Your Borrowing Needs: Start by determining what you need financing for. Do you need a new tow truck? How much is the truck you’re eyeing? Getting into specifics can help you find the best financing option for you and your situation.
- Use an Equipment Finance Calculator: Estimate how much you’ll pay in monthly loan repayments using our useful tool. This can help you make informed decisions when applying for a loan.
- Seek Professional Help: Contact our team at Dark Horse Financial to get started. We can help you with the following:
- Choosing a lender with a track record of lending to tow truck businesses and similar companies
- Choosing a loan product that matches your borrowing needs
- Securing the lowest possible interest rates for your individual situation
- Customising loan terms to fit your cash flow
- Streamlining the process to ensure you get financing quickly and hassle-free
In Summary
Investing in a tow truck is a significant step toward growing your towing business, but it doesn’t have to be a financial burden. With tow truck loans in Australia, you can access the funds you need to purchase the right equipment while preserving your cash flow and enjoying tax benefits. Whether you’re looking for a chattel mortgage or a leasing option, there’s a tow truck financing option that’s right for your business.
By understanding the different types of loans available, how to qualify, and what to do to choose the right type of loan, you can make an informed decision that sets your business up for success.
Unlock the Potential of Your Towing Business with Tow Truck Loans
If you’re ready to take your towing business to the next level, explore your tow truck financing options today. Our team can help you every step of the way, from lender selection to loan settlement and beyond. Contact us today to learn more about how we can help you.
