can a limited company apply for HP loan in its own name ?

[Davers2k]

HI, quick question as im thinking of changing to a limited company from a sole trader soon.

(business is airport transfers etc)

in the past when i've got a new car i've just got a personal HP loan on it - as a limited company i wouldn't be buying the car on personal HP would i ? the company would be buying the car i would of thought so how would i fund that purchase ? Odd question i know lol but would the company apply for a loan from the bank / HP from the dealership or would i do it in my name ?

 

[Scalloway]

I don't think there is anything to stop you. If you buy the car yourself the company is limited to paying you 45p per mile for business use.

 

[Mark T Jones]

The simple answer is that you can apply for HP or loan in the business name - you will almost certainly be asked to give a PG

 

[Davers2k]

Thanks for the answers.

 

[Alan_MultileasingSE]

Sorry to be the bearer of bad news :/ but it would be pretty hard to finance a car through a brand new limited company, as it would have zero proof of trading (a bit like someone applying for finance with zero credit history!). You may be best applying for a credit agreement as a sole trader first (so they will check your own credit file rather than the company's), and then transfer the payments to a limited company bank account etc when it is set up. Obviously, once the company has been trading for as year or two you will then be able to apply in the company name! You may also find the lease option will be a lot cheaper and cost effective, especially if you are vat registered as you can claim a minimum 50% of it back on the monthly payments

Hope that helps! Any questions, feel free to PM me

Alan

 

[john1989]

You may be best applying for a credit agreement as a sole trader first (so they will check your own credit file rather than the company's), and then transfer the payments to a limited company bank account etc when it is set up.

Alan

Do not do this!

 

[Alan_MultileasingSE]

Do not do this!

Could I ask why not? It is pretty common for companies to change from a sole trader to a limited company during finance agreements. As the OP is currently a Sole Trader they would need to underwrite as a Sole Trader anyway, the company is essentially non existent as far as underwriting goes until the first set of accounts are submitted

 

[john1989]

Could I ask why not? It is pretty common for companies to change from a sole trader to a limited company during finance agreements. As the OP is currently a Sole Trader they would need to underwrite as a Sole Trader anyway, the company is essentially non existent as far as underwriting goes until the first set of accounts are submitted

Giving a personal guarantee is completely different to having a car lease in your personal name, rather than that of your company.


Changing the payment details to the company will not make the leasing costs deductible for the company. Instead, the leasing costs would have to go to the directors loan account – if the director ends up having an overdrawn directors loan account, there may be tax consequences.


Any VAT will also not be reclaimable for the company.


If the lease must be obtained personally, it is best to use the approved mileage rates from a tax perspective.

 

[Alan_MultileasingSE]

A sole trader takes out a business contract as 'Personal Name t/a Business Name' which is different to a Personal Contract. A sole trader finance agreement is still a business agreement. and would be taken out in a t/a name. The payments can also be taken from a business account instead of a personal account. Yes, the individual would still be responsible for the payments, but they would still be responsible if taken out as a limited company contract with a directors guarantee (which any funder would likely ask for in the first few years of trading anyway).

I can only advise re getting the funding in the first place, but unfortunately at least 90%+ of finance companies won't look at a brand new start up limited company full stop, and those that will be more expensive and demand a DG that makes the signing director liable for the payments should the company not make them. All finance companies will look at a sole trader application, and if this is then setup as a limited company the paperwork will be in the t/a company name (assuming the two are the same bar the 'ltd')

There is a world of difference between being 'tax efficient' and not getting funding for a vehicle to run the company!

 

[Scalloway]

Legally the HP agreement will only be in the limited company name if the director signs as the director of the limited company. The ltd company is a completely different legal persona from the director/sole trader. I agree with @john1989 about what the consequences will be if the wrong route is taken.

 

[john1989]

A sole trader and a limited company, despite both being businesses, operate very differently.


You can fudge the paperwork till the cows come home, it doesn’t make it a company lease.


As I’ve said, switching the payment details is not advisable and you’d be better off claiming the mileage rate.

 

[Alan_MultileasingSE]

Again - I can only advise on getting the finance in the first place! Although, points taken about the tax implications

 

[Davers2k]

Some interesting debate thanks.

Ive been trading as a sole trader for 5 years. My current car finance will be up this year and next year ill be looking at upgrading to a much more expensive car. Ive no problems getting the finance in my name in terms of passing personal credit checks etc but my initial thought was that i shouldn't be doing that once i've changed to a limited company as i'm not the company so therefore the company should supply the car rather than me (if that makes sense)

If i do end up going limited before my current finance deal is up ill speak to the accountant regarding what i should do to pass my current car into the companies ownership and away from mine. The new car ill deal with as and when i get round to getting it - hopefully a year down the line ill have enough of a sum built up to not have to finance much of it

 

[Mark T Jones]

My experience is somewhat different to Alan's - though we offer simple HP ior finance lease. In the case outlined, the deal would be viewed on the sole trader history, albeit with a PG

Tax wise - you need personalised advice