For many self-employed individuals, owning an ATV offers not just recreational excitement but also practical applications in their day-to-day work. That being said, securing financing for an ATV as a business owner or contractor can be a challenge and may seem daunting to some who are not equipped. Traditional lending institutions often perceive self-employed borrowers as higher-risk applicants. In this blog we confide in our parters at Revival Powersports to help guide self-employed individuals through the ATV financing application process and provide useful tips to improve their chances of approval.
Understanding Your Credit
The first step in any financing application process is to understand your credit situation. Your credit history will heavily influence the interest rates you'll be offered as well as the terms of your loan. It is important to understand that your score does not necessarily determine the outcome of your approval. Canadian recreational lenders look at the overall history including established credit, general payment history, installment loan payback and current debt service loan in conjunction with your current income to determine your risk level. An important note is that no credit does not equal good credit. The same idea goes for credit card payments as they do not necessarily prove credit worthiness for an installment loan.
Understanding Current Interest Rates
Another important factor when getting an approval in place is understanding the economic climate overall. Keep in mind that recreational financing is an entirely independant sector from automotive and home loans and, as such, interest rates are not comparable. In most cases you can expect the top tier interest rates for pristine credit on recreational loans to be a few percentage points higher than the prime rate in Canada. In some cases, a manufacturer may offer discounted rates if you purchase brand new from their showroom. We discuss the pros and cons of manufacturers financning in our ATV financing breakdown.
Preparing the Required Documents
In the best case scenario with thick credit build and positive payment history, income may be waived leading to solely requiring identity verification documents to complete the process. This is a rare occurance, however, and for the vast majority there may be a number of documents required. In this section we will cover what could be required and give you a heads up on expectations. It is important to note that all recreational lenders in Canada follow the same standards when it comes for document requirements for self-employed applications.
1. Business Banking - Lenders will typically want to see at minimum three months of business banking showing the registered business number as well as deposits into the account to prove that the business is currently in operation. If you work seasonally, you may want to send in as far back as necessary to ensure that your busy months are accounted for. These statements must be sent as PDF documents directly from the bank branch as lenders do not accept screenshots of online banking.
2. Business Invoices - The lenders will want to see customer invoices showing that you have current clients rolling through and are in full operation. These invoices should match deposits on your business banking.
3. Corporate Registry or Business License - The lenders will need some documentation to tie you to the business. This is usually easily accomplished in the form of a coporate registry or business license document showing both your business number and your full name.
4. Notice of Assessment or Tax Forms - Depending on the previous documents, the lenders may want to confirm any back taxes owing and will request a NOA (Notice of Assessment) to ensure everything is up-to-date.
Having these documents are well-organized and up-to-date coming in will lead to a smoother and much quicker process on the back end. In some cases, lenders may also request additional information such as client contracts or invoices to verify your income.
Choosing the Right Lender or Broker
Just like any other loan, the lender you choose may provide different outcomes. While traditional banks may have stricter requirements for self-employed borrowers, there are alternative financing options available, such as credit unions, specialized ATV financing companies, and even online lending brokers such as our ATV financing partner Revival Powersports. Using a broker may be the best choice as they will typically have access to multiple lenders and can shop them against eachother for the best rate available.
Securing ATV financing as a self-employed individual may be more challenging, but it's certainly achievable. By being proactive, well-prepared, and diligent in your search for the right lender, you can improve your chances of getting approved for a loan that suits your needs. For more tips and tricks, be sure to check out our Guide to Getting the Best ATV Loan in 2023.
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