This may not seem like a big deal on paper, but in the real world, it is positively massive. And I know this firsthand.

Before we launched this program, I called around to see if anyone would do this. I called financing companies, banks, you name it… and I was very specific: I wanted to finance a business-use SUV in my company name. 

I did not want a personal loan. I did not want a business blanket lien. I wanted to finance an SUV, except on the loan paper I wanted my company name first instead of mine. 

The answer I got was the same everywhere: NO.

I was offered plenty of personal loans. I was offered a large business line of credit by a few big banks, or financing for an entire fleet. But nobody would do what I was asking for – a single SUV financed in my company name.

So to us, it seemed like a niche that needed filling. Because we’re asked about this repeatedly. We got to work.

Right away, we found out why nobody offers this: it’s a nightmare. I don’t want to bore you with the details (because they are boring), but all lenders have bosses, and those bosses are not comfortable with small businesses being the lead borrower on paper for an SUV or two.

To overcome these issues, we had to significantly raise the credit requirements for this program. That proved satisfactory, and the program was launched.

This means if you meet the elevated credit requirements, you can finance a business-use SUV in your company name. Sweet, right? 

We worked hard to offer this program, and we hope it helps some companies. Click the above link to see the details.  

Most of the questions are tax-related, and we can’t give official tax advice. But there are tax deductions for partial business-use vehicles, and most of them follow the same rules, which I’ll outline here.

The big rule is how much “business use” the vehicle will be subject to. And the threshold for most instances is a minimum of 50%.

This means the vehicle must be used for business at least half the time for it to be considered a partial business-use vehicle in most cases.  

So what is business use exactly? It’s when the vehicle is used for business purposes. In cases of pickup trucks and SUV’s, it’s pretty clear – jobsite use, hauling materials, going to and from jobs to quote, check on the crew’s progress, etc. However, it is NOT bringing your kids to Little League, even if your company did sponsor an outfield wall sign (and good for you in doing that!)  

It gets a little murkier when it comes to larger SUV’s and even passenger vehicles. The same 50% rule applies, but in many cases, business use is a little ambiguous. Is picking up business supplies as well as household groceries business use? That’s for the IRS to answer, not me. But I will say that’s probably not a fun conversation at the audit.

One thing that’s very clear though: a typical commute is NOT business use. Even if you own a company, the time commuting from your home to the physical office is not business use. 

Lastly, size does matter. Nearly all 50% partial business-use vehicles are eligible for some type of deduction, but the larger ones get the bigger deductions. 

Ok, that’s about it on the rules for partial business-use vehicles. I hope it helps, and that the biggest takeaway  is “ask your tax professional”. 

But just “why” do you need a commercial auto policy for a business vehicle? Here are a few reasons:

• Coverage limits are generally higher. And you need them to be higher. Monetary/liability-wise, your personal policy protects your personal life (your house/etc.), but if everything goes as planned, your business should be worth more. People also love to sue businesses. So there’s that.

• Coverage for employees driving. This is important – your personal policy likely will not cover employees driving the vehicle. A commercial policy should (note: all of these are general statements and suggestions – your insurance professional has the final word). 

• Last post, I mentioned my friend’s trailer accident had a lot of gas spillage. Luckily there was no issue with that, but what if there was? What about other cargo you may be carrying? Is any of it toxic? What happens in the event of an accident? A commercial policy can (and should) include coverage for this.

• On the subject of business cargo, either yours or someone else’s… who covers that in the event of an accident? I promise you your personal auto policy won’t. 

• Let’s say you and your employees go to a convention on business. You rent a car. There’s an accident. The rental company’s policy is bare bones and woefully inadequate. Your personal auto insurance policy says “well, you folks were there on business… talk to the company that sent you there”. A commercial auto policy for your business can cover this (again, talk to your agent regarding the details.) 

There are a lot of other reasons why a commercial business vehicle policy makes sense. But the proceeding should give you a good idea on the basics. 

Happy driving!

Let’s back up about 15 years – my buddy decided to start a landscaping business, and like many others, basically went the DBA route. One day he was a regular guy with a regular job, and the next he was a business owner. He already had a pickup truck, he borrowed a small trailer from his father, bought a mower and some other equipment from a big box retailer, and went on his way.

Later that summer, he was doing decent, and took on a part-time helper. One day, he sends the helper to the store to get something they needed… and there was an accident. Someone ran into the trailer, gasoline (two 5-gallon containers worth) was everywhere, and some of the hand tools were destroyed (luckily the mower was not on the trailer.)

Turns out it was the other driver’s fault, and the insurance companies worked it all out, but then he got a call from his insurance agent. Basically, they told my friend he was super-lucky. Since the other driver was at fault, their company ended up paying, but if the tables were turned and my friend’s helper was the one at fault… well, that could be an issue. 

See, my friend, like tons of other small DBA-type companies, used his personal vehicle for business. But, unknown to him, he was taking a massive risk – he never got a commercial / business vehicle policy. And the insurance company has little interest in paying out when a personal vehicle is used for business and there’s an incident (never mind the employee driving it). And honestly, you cannot blame them.

For any business vehicle, there are two things that are almost non-negotiable: the vehicle should be registered in the company name, and it must be insured with a commercial policy.  For the record, Crest Capital ONLY works with companies in business for at least two years and will finance the business vehicle in the company name, as well as register and insure it that way as well. This way there are no issues or surprises.

Remember: you don’t get to buy insurance after the fact. When there’s an incident, you either have it or you don’t. No do-overs.        

In the next post I’ll discuss a few details about business vehicle insurance that companies should know about. But for now, just know that you must have it. Anything less is taking too big a risk. 

It is true that equipment financing can be similar to automobile financing in terms of the equipment being part of the collateral in the big picture. But only to a degree, and it also really depends on the equipment. Let me give you a few examples of equipment that isn’t great collateral:

• Specialized equipment for specialized industries – This is probably one of the bigger issues with using equipment as collateral. If the equipment is even somewhat specialized, it can be tough to sell, as there’s just not a big market for it. For example, think about the machine that makes those little hard candies that come on a paper strip – you know what I mean, right (they’re right next to the wax bottles of colored liquid). Well, a machine does that, and it’s not a machine that every business can use. So if it has to be repossessed, the line of buyers might be small indeed. My sister (who loves that candy) might even pony up a few dollars for a used candy maker.

But it doesn’t even have to be a super-specialty piece of equipment. Even something like a large printing press might not be easy to sell these days.

• Computers and other electronic equipment – No brainer here. Computer equipment ages like no other equipment. And almost any electronics aren’t far behind. How’s that monster 48” rear-projection TV doing? Call me on your flip phone and tell me, ok? If I don’t answer, hit up my pager.
• Software – Again, no brainer. Especially software that’s named after a year (anyone buying Office 2010 these days?) Plus, you really can’t repossess software.
• Vehicles – Surprising? Not really. Most vehicles lose value annually. Although after a huge drop when it leaves the lot (assuming a new vehicle here), the rate of depreciation is slower. Plus, it also depends heavily on the vehicle and industry. Some vehicles are easy to resell (you can always find a willing buyer for a dump truck), but some aren’t (not a huge demand for septic trucks).

These are just a few examples of equipment that doesn’t make great collateral in an equipment financing deal. Maybe next time I’ll explore things that make very good collateral.