| Since the vehicle will be part of the company's | | | | Given that the vehicles will be used as part of your |
| production chain, either for transportation of | | | | production chain, repossession will disrupt it and turn |
| personnel, products or supplies, it won't be a luxury | | | | repayment of your obligations and income generation |
| item (as may be the nature of a personal vehicle) but | | | | even more difficult. Thus, if you can afford |
| an investment that will be part of the company's | | | | unsecured loans or provide another asset as collateral |
| assets and its financing, insuring, amortization, etc. are | | | | of the loans, you should consider that alternative. |
| all variables that will impact on the company's | | | | Different Sources of Finance |
| accounts. | | | | There are many sources of finance you can resort |
| Interest Rate: Fixed or Variable | | | | to in order to finance the purchase of a commercial |
| Interest rates as in most other type of loans come | | | | vehicle: Secured Loans, Equity Loans and Lines of |
| in two flavors: Fixed and Variable. Fixed interest rates | | | | Credit, Unsecured Loans, Leasing, etc. All of the |
| will remain the same over the whole life of the loan | | | | above are fine sources of finance. However, each |
| giving your accountants the ability to predict more | | | | one has its benefits and drawbacks. |
| efficiently the incidence of the loan on the company's | | | | Secured loans come with the risk of repossession. |
| accounts for the years to come. | | | | Whether the asset securing the loan is the vehicle |
| A variable interest rate, on the other hand, changes | | | | itself or another property, you are risking |
| over time according to market conditions. During a | | | | repossession of the asset. Nevertheless, these loans |
| rather stable period of time, a variable interest rate | | | | carry the lowest interest rates and provide the |
| will provide cheaper finance than a fixed one. | | | | cheapest source of finance. |
| However, if market conditions worsen, the interest | | | | Equity loans and lines of credit (if using business |
| rate may skyrocket and turn out to be a huge | | | | equity) can provide another cheap source of finance |
| burden. Moreover, budgeting with variable rate loans | | | | but also carry the risk of repossession. Unsecured |
| is far more complicated. Accountants are used to it | | | | loans on the other hand do not imply this risk but are |
| though. | | | | a more expensive source of finance, they provide |
| Risk of Repossession | | | | less funds and shorter repayments programs. |
| Another factor to be taken into account is the risk | | | | Leasing is another option that provides an |
| that secured loans imply. Since these loans can be | | | | intermediate cost source and has some tax benefits |
| secured on the same property being purchased, the | | | | too. It's just like renting the vehicle for a certain |
| company won't have to provide another asset as | | | | period of time at the end of which you have the |
| collateral for the loans. However, if you fail to meet | | | | option to turn those monthly payments into part of |
| the monthly payments, the vehicles can be | | | | the price of the vehicle that you can purchase by |
| repossessed. | | | | canceling the difference. |