There are times that businesses face difficulties with their finances leading to bad credit. A poor credit history restricts your chances of acceptance for equipment finance regardless if the equipment will help improve company profits.
Standard lending institutions such as banks may deny you the loan you need. However, there are specialized loan companies who can look beyond your bad credit. These lending institutions can offer you a second chance at availing the equipment you will need to grow your business by providing bad credit equipment finance.
Equipment Financing is short-term loans (about 3-5 years) extended to businesses specifically to buy the equipment required for its operations. Equipment financing is a security loan, meaning the equipment you bought could be repossessed if payments go into default. Since the loan is discharged with a security, lending companies see it as low risk and may offer a lower interest rate compared to a standard loan.
To qualify for an equipment loan, an individual must have a credit score of 600, been in business for at least 11 months, and create approximately $100,000 in earnings. For those who have a poor credit but meet the other two requirements, there is still a chance for you to avail of a fund. It really depends upon the lender’s appraisal of your financial situation.
Equipment financing is an alternative for startup and tiny businesses for growth and development especially for those who don’t have sufficient capital to fund their purchase. And in case you’ve got a poor to bad credit score, being granted an equipment financing provides you the chance to improve your credit rating.
How to improve your chances of approval for equipment financing despite bad credit
You can improve your chances of an approval for equipment fund. By making ways to improve your credit standing and strengthen your application to lenders, there’s a fair possibility that loan companies will consider your loan application. Below are ways to strengthen your application.
1. Lenders can consider your application if you are applying with someone that has a better credit standing. The cosigner can provide security for the loan considering that the consignor has equivalent obligations as the borrower.
2. Present other assets for security. In case you have other resources such as other kinds of equipment or even real estate property, you can offer it as a security. It strengthens your application to secure the loan.
3. Bigger down payments. Do you have enough money to put down payment to significantly decrease your total loan amount?
4. Proof to show company is growing strong. Provide documents like bank statements showing a good revenue for the past months. Lenders like to see a growing stable company, so it’s essential to give income statements and other documents to support your claim.
5. Seek expert help. With bad credit, lenders will provide you a hard time acquiring a loan. But with proper help from loan specialists, you can increase your chance of getting the perfect lender who can look beyond your bad credit.
Bad Credit Equipment Finance is a type of business loan that offers funding for equipment despite of bad credit history. You’ll have a better chance of getting an approval when you seek help from loan experts who have years of experience assisting businesses get the ideal loan for their needs.