There are times that businesses face difficulties with their finances resulting in bad credit. A bad credit history restricts your chances of approval for equipment finance regardless if the equipment will help improve business profits.
Traditional lending institutions like banks may deny you the loan you need. But there are specialized loan companies who can look beyond your bad credit. These lending institutions can give you a second chance at availing the equipment you need to grow your business by offering poor credit equipment finance.
Bad Credit Equipment Finance for Growing Businesses
Equipment Financing is short-term loans (about 3-5 years) extended to businesses specifically to purchase the equipment needed for its operations. Equipment financing is a collateral loan which means that the equipment you purchased could be repossessed in case payments go into default. Since the loan is released with a collateral, lending companies view it as low risk and may offer a lower rate of interest compared to a standard loan.
To qualify for an equipment loan, one must have a credit score of at least 600, been in business for at least 11 months, and generate around $ 100,000 in revenue. If you have a bad credit but meet the other two requirements, there is still a chance for you to avail of a finance. It really depends on the lender's assessment of your financial situation.
Equipment financing is an alternative for start-up and small businesses for growth and development especially for those who don't have enough capital to fund their purchase. And if you have a poor to bad credit score, being granted an equipment financing gives you the chance to improve your credit score.
How to improve your chances of approval for equipment financing despite bad credit
You can increase your chances of an approval for equipment finance. By making ways to improve your credit standing and strengthen your application to lenders, there is a fair chance that loan companies will consider your loan application. Below are ways to strengthen your application.
1. Apply with a cosigner with good credit standing. Lenders can consider your application if you are applying with someone who has a better credit standing. The cosigner can provide security for the loan considering that the consignor has equal obligations as the borrower.
2. Present other assets for collateral. If you have other assets such as other types of equipment or even real estate property, you can offer it as a collateral. It strengthens your application to secure the loan.
3. Bigger down payments. Do you have enough cash to put as down payment to significantly lower your total loan amount? If you are able to present bigger down payments, lenders may consider you a candidate for poor credit equipment finance.
4. Proof to show business is growing strong. Provide documents like bank statements showing a good revenue for the past months. Lenders like to see a growing steady business, therefore, it is essential to provide income statements and other documents to support your claim.
5. Seek professional help. With bad credit, lenders will give you a hard time acquiring a loan. They may even deny the loan immediately after checking your credit score. But with proper assistance from loan experts, you can increase your chance of getting the right lender who can look beyond your bad credit.