Prospective or currently active Uber and Lyft drivers sometimes need help financing their businesses. A driver can apply for traditional loans, such as car loans and personal loans, to finance a rideshare business. Additionally, rideshare drivers can finance a rideshare business by applying for business loans through entities such as the SBA or other small business loan platforms.
The founding of Uber in 2009 and its introduction to the general public in 2010 revolutionized the way people travel. Uber opened up many more options for car travel, particularly in the United States, where taxi service is limited outside major northeastern cities like New York. It also represented the birth of the app-based “gig economy,” which gave people the option of working whenever they wanted in services they could provide, such as driving. Many individuals who could not take on full-time work — such as parents who couldn’t afford childcare — could now become gig workers, taking on-demand work whenever they wanted.
Whether you are aiming to pursue a career as a rideshare driver or simply looking for a part-time gig while studying for your master’s degree, there are costs involved in running a rideshare business by driving for Uber or Lyft. Luckily, if you don’t have any spare cash to invest, there are options available to get fast and transparent financing for a rideshare business.
Why should I invest in a rideshare business?
There are many reasons you’ll need to invest in your rideshare business, regardless of whether you have the cash to do so in your bank account. Your car might need maintenance and upgrades to ensure maximum performance. You also need working capital to pay for essentials, such as gas and toll fees.
If you’re looking to finance a rideshare business, you effectively have three options to obtain financing: your personal credit, your vehicle, or your rideshare business. Personal loans and securitized auto loans are offered by banks and auto dealers. Business loans are offered through the Small Business Administration (SBA) or alternative business loan platforms.
Rideshare business expenses
A rideshare business — that is, driving for a rideshare company like Uber or Lyft — operates like any other small business. In order to achieve maximum performance and efficiency, you need to continuously invest in certain aspects of your business over time. Furthermore, if you’ve started completely from scratch, you will need startup capital to purchase a vehicle.
Here are some of the most common business expenses for Uber and Lyft drivers:
Your vehicle must meet the following requirements before you’ll be allowed to drive for Uber:
- The vehicle must have four doors and be able to transport a minimum of four passengers.
- The vehicle model must be 15 years old or newer.
- The title cannot be salvaged or reconstructed.
- Rental vehicles — except those from an approved Uber rental company — are not permitted.
- The vehicle cannot have any cosmetic damage, missing pieces, commercial branding, or taxi paint jobs.
Basically, if your car is older than 15 years, has substantial damage, or only has two doors, you will need to buy a new car for your rideshare business. Whether you go the used or brand new route, a new vehicle will require a considerable amount of capital.
Vehicle maintenance and upgrades
A car doesn’t last forever; sooner or later, it’s going to need maintenance and repairs to keep it going. Rideshare drivers, especially those who are in the rideshare business for the long haul, need to regularly invest in vehicle maintenance, such as spare parts and repairs for damage beyond what Uber deems acceptable.
Furthermore, upgrades to your vehicle can make for a smoother or faster ride. An investment in vehicle upgrades can translate into better reviews from passengers, which in turn translates into more work.
Gas prices and tolls are common expenses that Uber drivers need to cover. In addition to this, many Uber drivers offer perks such as bottled water and multiple cell phone chargers for different types of phones. In order to consistently cover all these costs, an Uber driver must maintain a certain level of working capital in their rideshare business.
How to finance your rideshare business
If you’re short on cash, don’t worry. Here are a few options you can use to finance your rideshare business:
Car loans for Uber drivers
You likely already know what a car loan is, and you can use one to purchase a new or used car to drive for Uber. Auto loans are secured loans for which the vehicle itself acts as the asset. Car loans are offered by banks, credit unions, and auto dealers who use a variety of financial institutions to facilitate a loan.
Personal loans for Uber drivers
SBA loans for Uber drivers
Thanks to the passage of the CARES act in 2020, the Small Business Administration now offers loans to small businesses in the gig economy, including rideshare businesses. As of 2021, the Paycheck Protection Program (PPP) — intended to provide relief for businesses impacted by the COVID-19 pandemic — is no longer available for small businesses and independent contractors, such as Uber and Lyft drivers, but the hope is that similar programs will be funded at some point in the near future.
Alternative small business lending platforms
A host of companies have cropped up in recent years to offer online loans to small businesses operating in the gig economy. Depending on the lender, you can get a loan amount of up to $10,000 plus a $15,000 line of credit, which is great for covering upgrades and car maintenance. However, these lenders tend to charge high interest rates — in some cases upwards of 10% APR.
Interestingly, Uber used to offer a vehicle financing platform directly from the company. However, this platform was shut down in 2017 after the FTC filed a lawsuit filed against the company for misleading drivers about the costs and benefits of the program. Uber settled the charges for $20 million, which was distributed to drivers in 19 major cities.
In-house renting programs
Uber and Lyft offer car rental programs tied to their services. Both companies regulate what types of cars you can rent to be a rideshare driver, so if you don’t want to buy your own car, it makes sense to rent through one of their programs.
Uber’s Vehicle Marketplace, for example, has partnered with companies such as Hertz and Avis to provide standardized and affordable rental options to their drivers. However, it’s important to note here that regular rental fees can greatly reduce the profit margin of your rideshare business, so if you can afford one, it may be better to buy your own vehicle.
How to start a rideshare business driving for Uber or Lyft
So you’ve reviewed all the different financing options above and chosen the right one for you. You’ve obtained the cash you need, and now you’re ready to start driving! Here’s what you need to know to start your rideshare business:
How to drive for Uber or Lyft
- Meet the minimum driver and vehicle requirements
- Submit your documents
- Complete a driver screening
- Start driving!
1. Meet the minimum requirements
To drive for Uber or Lyft in the U.S., you must meet the following minimum requirements:
- You must meet the minimum age requirement to drive in your city.
- You must have at least one year of driving experience (three if you are under the age of 25).
- You must have a valid U.S. driver’s license.
- You must own or purchase a vehicle that meets the company’s vehicle requirements (four doors, 15 years old or newer, etc.).
2. Submit your documents
Once you’ve met the driver requirements, you will need to submit the following documents:
- Driver’s license
- Proof of residency in your city or state
- Proof of insurance and registration on your vehicle
- Profile photo other than your driver’s license photo that shows your whole face
3. Complete a driver screening
After you submit your documents, you will need to complete a driver screening online. This is to ensure that you have no criminal record and are psychologically sound.
4. Start driving!
Once you have obtained financing for your business and completed your application, you are good to go. You now have a small business that can generate income and the freedom to work whenever and as much as you want!
Can I get a personal loan if I drive for Uber?
Yes, you can get a personal loan if you drive for Uber. As long as you have a decent credit score, you can easily get a personal loan for almost anything you want.
What kinds of loans can Uber drivers get?
Uber drivers can get personal loans, secured auto loans, and small business loans.
Can an Uber driver get a Paycheck Protection Program (PPP) loan?
An Uber driver could get a PPP loan until May 2021, when the program was discontinued.
Does Uber offer cash advances?
Uber did offer cash advances starting in 2016. This program has since been discontinued, but there are other online lending platforms that will offer a cash advance.
- Uber and Lyft are part of the rideshare gig economy that gives independent contractors control over when and how much they work.
- Like any small business, a rideshare business driving for Uber or Lyft requires an investment to start — in this case, to purchase a vehicle and cover maintenance and other regular expenses.
- Financing for a rideshare business is available in the form of personal loans, auto loans, and small business loans.
- Once you have procured the necessary financing, met the minimum requirements, and completed your application to a rideshare company, you can start driving and earning income on your own schedule.
View Article Sources
- Vehicle Requirements – Uber
- Driver requirements – Uber
- Rent a Car to Drive with Uber – Uber
- Loans – Small Business Administration
- Paycheck Protection Program – Small Business Administration
- Uber Agrees to Pay $20 Million to Settle FTC Charges That It Recruited Prospective Drivers with Exaggerated Earnings Claims – Federal Trade Commission
- What is a payday loan? – Consumer Financial Protection Bureau