Don’t Let Bad Credit Keep You From Financing Your Equipment
You need new equipment for your business but you can’t afford it. Likewise, you can’t look to traditional loans because of credit mistakes in your past. Bad credit doesn’t have to stop you from receiving financing.
This is where equipment funding comes into play.
What to Know About Equipment Financing
Equipment funding allows you to purchase new equipment for your business. Unlike a small business loan, the equipment is collateralized. If you default on the financing, then the equipment may be repossessed. Loans for equipment vary and last from three to five years. Since this type of financing is less of a risk, interest rates are usually lower.
Who Qualifies for Equipment Funding?
Before you start to look into this form of funding, you want to know your chances of approval. Do you qualify for financing? Here are a few ways that you can find out if you qualify:
- You generate about $100,000 in annual revenue
- Your credit score is at least 600
- You have been in business for at least 11 months
Now, keep in mind that even if you don’t hit every mark on this list, you may still qualify for equipment financing.
What Documentation is Required?
When it comes to equipment funding, you don’t need a lot of documentation. This is what sets this type of financing above traditional business loans. Loans tend to be document-intensive. If you are thinking about equipment funding, however, you will want to gather the following documents:
- A voided business check
- A quote for the equipment you need
- Business tax returns
- Personal credit score
- An identification or driver’s license
- Business bank statements
How to Be a Better Candidate
If you’re worried about your credit history, there are ways that you can strengthen your application so that lenders will be more interested. Here are some of the ways to be a better candidate:
- Offer your other assets as collateral
- Find a cosigner
- Make a bigger down payment
- Document a strong business model and history
The idea is that you need to show the lender that you will be able to cover the financing in the future. Having other assets as collateral, a cosigner and being able to show profit are ways that you can give your lender peace of mind.
When you need crucial equipment for your business, you can’t always wait until you have the money saved. Even with bad credit, equipment financing is an option.