Can a new business lease a van?

01Can a new business lease a van with no trading history?

Yes, a new business can apply to lease a van even if it has little or no trading history. The finance provider has less company information to assess, so it may ask for more evidence, a higher initial rental, different terms or a personal guarantee in some cases.

A new business does not always need two years of filed accounts before applying. Instead, the finance provider may look at other information, such as expected income, recent bank statements, relevant experience and the person behind the application.

Evidence that may help includes:

• Recent business bank statements
• Proof of current or expected work
• Contracts, purchase orders or confirmed jobs
• Relevant trade or industry experience
• Personal credit history for the director or applicant

Newer businesses may also be offered shorter lease terms than more established companies. The exact terms depend on the finance provider, the vehicle, the agreement type and the strength of the application.

02What do finance providers look for?

Finance providers need to decide whether the business can afford the agreement and whether the application is an acceptable risk. Where there is limited company history, personal information and alternative business evidence can become more important.

For a newly established limited company, you may be asked for:

• Three to six months of business bank statements
• A Companies House certificate
• A copy of your UK driving licence
• Proof of address
• Evidence of current contracts, purchase orders or confirmed work
• A personal guarantee from a director in some cases

Sole traders may be asked for recent business bank statements, a UTR number, proof of identity and proof of address. Evidence of current contracts or confirmed work can also strengthen the application.

Relevant experience can help where the business itself is new. For example, someone who has worked in a trade for several years before setting up on their own can provide evidence of that experience to give the finance provider more context.

03What is the difference between contract hire, finance lease and hire purchase?

The main difference is what happens to the van and who carries the end-of-agreement responsibility. The Finance & Leasing Association describes asset finance as leasing and hire purchase solutions for businesses, with leasing giving access to equipment by renting it for a contracted period without owning it, while hire purchase is designed so the customer takes ownership after all payments are made.

For a new business, the suitable route depends on what matters most: predictable payments, flexibility, end-of-contract responsibility or eventual ownership.

04How much does new business van leasing cost?

There is no single cost for a new business van lease. The monthly rental depends on the vehicle, contract length, mileage, initial rental, optional maintenance and the finance provider's assessment of the application.

New businesses may be asked for a higher initial rental than established businesses because the finance provider has less trading history to assess. A larger initial rental usually reduces the monthly rental because more is paid at the start, but it also means less cash remains available for other business costs.

When comparing lease quotes, do not look at the monthly rental in isolation. Check:

• The initial rental
• The contract length
• The annual mileage allowance
• Whether maintenance is included
• Any extras or services included in the agreement
• What happens at the end of the contract

The FLA's business finance checklist also recommends checking that the final contract matches the quotation, including the rental amount, period of hire, any maintenance or services and the equipment being supplied.

05Do new businesses need a personal guarantee or credit check?

A personal credit check can be important where the business has little or no financial history of its own. Finance providers may consider the director's or applicant's personal credit history alongside the information available about the business.

A personal guarantee may be requested for a limited company, especially where there is little financial information available. A guarantee means the director can become personally responsible for the lease if the company does not make the payments.

For sole traders, a separate director's guarantee is not relevant because the business and the individual are not separate in the same way as a limited company. GOV.UK explains that a limited company is legally separate from the people who own it, while a sole trader is personally responsible for the debts of the business.

A declined application is not always the end of the process. The reason matters. Depending on the circumstances, the next step could be providing more evidence of income, changing the vehicle, changing the initial rental or considering another finance route.

06What is different for a limited company and a sole trader?

Both newly formed limited companies and sole traders can apply for van leasing, but the assessment is different because the legal position is different.

A limited company has its own legal identity, so the finance provider can consider the company and its directors. If there is little company information, the director's personal circumstances and a personal guarantee may become more important.

A sole trader is assessed more directly as an individual running a business. The finance provider will usually focus on personal financial position, bank statements and evidence that the business is trading or has work available.

GOV.UK says you get a UTR when you register for Self Assessment or set up a limited company, and that sole traders can find an individual UTR through HMRC records or online services.

07How can you improve a new business van leasing application?

The strongest new business applications give the finance provider enough information to understand the business, the work it has and its ability to meet the payments.

Have your documents ready

Prepare bank statements, registration information, identification and evidence of trading before applying. If you have contracts, purchase orders or confirmed work, keep these ready too.

Be realistic about the van and budget

The cheapest monthly rental is not always the most suitable option. Consider whether the van fits the work you do, how much mileage you expect to cover and how much cash the business can sensibly commit at the start.

Explain your experience

If you are starting a business in an industry you already know, make that clear. Relevant employment or professional experience can give the finance provider more context when the business has limited trading history.

Be open about problems

If there is an issue with credit history, limited trading evidence or another point that could affect the application, explain it. A finance provider can only assess the position properly if it has the full picture.

Consider whether a long-term lease fits

A long-term agreement may not suit every new business. If your work is temporary, seasonal or still developing, it may be worth discussing whether a shorter arrangement or a different finance type is more appropriate.