A guide to equipment financing with bad credit

Equipment financing is a critical part of running a small business. Equipment can range from office supplies and furniture to heavy machinery and vehicles. And when your business needs new equipment, but you don't have the cash on hand to cover the purchase, you may need to take out a business loan.

But what if you have bad credit? Don't worry, it's not impossible to get equipment financing with poor credit. You just might have to alter your expectations and do some extra legwork in order to get approved. There are lenders that provide financing for bad credit businesses, and at reasonable loan terms.

Consider researching lenders before you actually need the loan funds and give yourself the time to thoughtfully prepare your equipment financing application. These tips can provide a starting point to help you maximize your odds so you can grow your business with the right equipment, even with bad credit.

Bad credit equipment financing - do your research

Equipment financing is available to those who need it, and by doing your research ahead of time, you can increase your chances of being approved. Your credit score will be a major factor in determining whether you are approved for an equipment loan and at what interest rate. You can improve your credit score by paying your bills on time and maintaining a good credit history. Be prepared with all the necessary documents, including your business license, tax returns, and bank statements. Having everything ready will speed up the approval process and help ensure that you get the best rate possible for your equipment loan.

Prepare your equipment loan application

When you're applying for equipment financing, you'll need to have all your ducks in a row. That means having all your important documents ready to go.

Lenders will want to know everything about your business before they invest in it. So make sure you've got all of the necessary paperwork reviewed and on hand before you move to the application stage. This includes credit reports, of course, but also business plans, proof of ownership, cash flow statements, balance sheets, tax returns, bank statements, insurance policies - really anything and everything that's applicable for equipment loans.

When you're looking for equipment financing, you'll also usually need to have a contract or proposal from the seller in hand to share with your funding company. Make sure you take the time to prepare your application thoughtfully and completely - that way, you'll stand the best chance of securing the funds you need to grow your business.

Compare interest rates and terms among lenders

When you have bad credit, it can be difficult to find a lender who will give you the money you need for equipment loans. This is because your lower credit score indicates that you are a high-risk borrower, and equipment financing requires (usually) good financial history and a minimum credit score of at least 575. Interest rates and terms among lenders can vary significantly, so it's important to compare them before applying for a loan. A good thing for you would be if you could use your existing bank relationships.

Check the Interest Rates

The first thing you'll want to do is compare interest rates. Some lenders may be willing to work with you if your credit score is lower, but they will likely charge a higher interest rate as compensation. Make sure to ask about any hidden fees or penalties that may apply as well.

Look at the Terms of the Loan

Next, take a look at the terms of the loan. Do lenders require collateral? How long will you have to pay it back? What's the down payment? What are the monthly repayment options? Are there any prepayment penalties? It's important to be aware of all of these details before signing anything.

Compare Fees and Requirements

Finally, make sure to compare the fees and requirements of each lender. Some may require more documentation than others, a sizable down payment, or charge an origination fee for processing your loan application.

By comparing all three factors - interest rates, terms, and fees - you can ensure that you're getting the best deal on your equipment financing. This will help you avoid costly mistakes and get the money your business needs to grow your business. Additionally, here are a few more tips for choosing the best option:

Make a list of potential lenders

There are many online lenders and fintech companies that offer equipment financing, so start by doing a Google search for "equipment loans" or "equipment financing.". Finding equipment financing with bad credit isn't an easy task, but with good borrowing history, a good personal credit score, and some money in your savings account, we are sure that you can find multiple lenders that offer financing for both strong credit and bad credit businesses, at competitive rates.

Get pre-approved

Many lenders offer pre-approval so you can see what rate your business qualifies for before you apply for equipment financing for bad credit.

Apply online

Applying online is quick and easy, and most applications can be completed in minutes.

Read the fine print

Be sure to read the fine print before signing any paperwork, including the loan agreement, disclosure statement, delivery fees, soft costs, and other factors.

Have a solid business plan and financial projections in place

If you're like most small business owners, you know that having a solid business plan and financial projections in place is critical to getting approved for equipment financing. Equipment financing can be a great way to get the equipment your business needs without breaking the bank, but if your credit score is less than perfect, you may be worried about being approved.

Don't worry - there are lenders out there who are willing to work with small businesses that may not have perfect credit and they provide equipment financing for clients with a minimum credit score or less. But in order to increase your chances of approval, it's important to have a well-crafted business plan and realistic financial projections.

Putting together a well-crafted business plan is essential when seeking equipment financing with bad credit. By following these tips, you'll be putting yourself in a much better position to secure the funding you need to grow your business.

Boost your application

When you're looking for a small business loan, the last thing you want to do is damage your chances of getting approved before you've even started. Unfortunately, that's exactly what many people do when they have bad credit. Here are four ways to boost your equipment loan application and make sure you get the financing you need:

Build up your credit score

This is probably the most important thing you can do. High credit scores show lenders that their potential clients are reliable borrowers and increase your chances of approval. When your credit report shows an improvement, you will get yourself into a better position.

Offer additional collateral

If you don't have a high credit score, offer additional collateral to secure the loan. This could be anything from property to stocks and bonds. Businesses with low credit scores often do that, and get their financing, even with traditional lenders.

Increase your down payment amount

Another way to secure financing is by increasing your down payment amount above the required minimum amount. A larger down payment for bad credit business loans improves your chances. Also, a larger down payment means that your monthly or weekly repayments will cost less.

Get a co-signer with good credit history

If all else fails, ask someone with good credit history to co-sign on the loan with you. This will show lenders that you're serious about borrowing money and increase your chances of approval.

Stay positive, Equipment financing is not impossible with bad credit!

You may be feeling down because of your poor credit score, but don’t give up just yet. There are lenders who specialize in providing loans to businesses with less-than-perfect credit. With a bit of creativity and patience, you can qualify for equipment financing with bad credit. As long as you choose a lender who reports on-time payments, an equipment loan can also give you the chance to improve your credit.

Finberg Investment is here to help! We offer equipment financing and other financing options for businesses with bad credit, so you can still get the tools you need to succeed. With our help, you can overcome any obstacle and achieve your goals. Equipment purchase and equipment leases are possible even if you have a lower-than-minimum credit score. Contact us today and get equipment financing with a simple application process.