How to Get Equipment Financing With Bad Credit

Equipment, machinery, and vehicles are essential for many companies to operate. However, most of these items also require large capital that startups and small businesses just don’t have. Thankfully, small business loans can fund the purchase of equipment so owners don’t have to pay upfront.

But what if a borrower has poor credit? If that’s where you find yourself, don’t fret. Although you may need to submit a few more documents, getting approved for equipment loans with bad credit is possible.

Keep reading to find out more about business financing options for those with bad credit.

Can You Get Equipment Financing With Bad Credit?

Yes, it’s possible to get equipment financing with bad credit. With equipment loans, the equipment you’re planning to buy serves as collateral, which makes them a secured type of loan. Because of this, lenders are less strict with credit score requirements.

In addition, your eligibility depends on time in business, annual revenue, and type of equipment you’re buying.

At Clarify Capital, we strive to help small business owners get the funding they need to run and grow their companies. If you have bad credit, speak to a Clarify advisor today to learn about your equipment financing loan options.

Can You Get Equipment Financing With No Credit Check?

Unfortunately, credit checks are part of most loan applications. Lenders want to protect their interest and know you can pay back your loan. Looking at your credit history is their way of assessing your risk of defaulting on loan payments. This is true whether you’re applying for a personal loan or business loan.

With equipment financing, the machinery you’re buying serves as collateral for the loan. It means lenders can seize it if you don’t pay back the loan. The good news is that your credit score isn’t the most important factor for you to get approved for an equipment loan.

If you’re unsure about your credit, ask for help from professionals like Clarify. Speak to a Clarify advisor directly to find a financing solution that works for your needs and circumstances.

How to Apply for Equipment Financing With Bad Credit

The best time to apply for a loan is before you need it. And the best way to get approved for bad credit equipment financing is to be prepared. Research financing companies and their requirements. Take your time gathering the documents needed.

Here are a few things that can increase your odds of qualifying for financing programs.

Determine How Much You Need

Before applying for a loan, figure out why you need the funding, how you’ll use it, and how much you need. Typically, companies borrow to buy assets to increase their income and grow the business. But paying for large purchases (e.g., new equipment, machinery, or vehicles) upfront can drain working capital.

This is why small businesses take out loans.

Once you’ve identified why you need capital and how you’ll use the funding, the next step is to determine the loan amount you want to borrow. Here, you’ll do some canvassing to get the most accurate price for the new or used equipment you’re planning to purchase. Account for taxes, delivery or installation charges, and other additional fees.

Plan how to repay the loan, as well. Review your business expenses to ensure your company can afford the monthly payments, even if the purchase doesn’t bring in revenue right away. Otherwise, you may be risking a lot more than the equipment you’re financing.

Gather Your Business Information

Whether you’re applying for financing from a traditional bank, a credit union, or an online lender, you’ll most likely need to submit personal documents and company financials. Have the following documents ready:

  • Legal proofs, such as a driver’s license, passport, federal tax ID, or employer identification number (EIN)
  • A copy of your business license
  • 3 to 12 months of recent bank statements
  • 1 to 2 years of business tax returns
  • 1 to 2 years of personal tax returns
  • Financial statements, such as profit and loss (P&L) statements and balance sheets

If you don’t have a strong credit history, it also helps when you can show lenders that your business can afford to pay back the loan. In this regard, lenders also want to know about:

  • Time in business: Online lenders typically require that your business has been operational for at least six months. Loan providers use your time in business to assess your risk. The longer you’ve been operational, the lower your risk — which increases your chances of getting approved for financing.

  • Average monthly income: Most lending companies would like to see that your business generates at least $10,000 a month. Your average monthly revenue helps lenders calculate the maximum loan amount your business qualifies for.

Some lenders may also want to know how you plan to use the funding and repay your loans. Be prepared to submit a business plan with details about how the equipment purchase will increase your revenue and grow your company.

Apply for Equipment Financing Online

Even though traditional banks offer equipment financing programs, it may be difficult to meet their strict requirements if you have bad credit. Your chances of getting a loan are often higher with online lenders. They have more flexible requirements, such as shorter time in business and lower minimum credit scores.

You can complete the entire application process online and get preapproval within one business day. However, make sure you understand the application process and how a preapproval check can impact your credit score.

Lending companies usually do a soft credit pull in the early stages of a loan application. It doesn’t affect your credit score, so you can shop around to compare offers. But a hard credit pull affects your credit score. If you don’t get approved by one lender, be careful about submitting multiple applications at once.

At Clarify Capital, we make the process of finding the right lender easier for you. We connect you to lenders who want to work with you, whether you’re looking for a line of credit, heavy equipment financing, or a term loan. Your Clarify advisor will help you choose the best financing option and repayment option based on your needs and situation.

Apply for financing with Clarify today! Get the business equipment you need without draining your cash flow.

What Credit Score Do You Need for Equipment Financing?

At Clarify, most of the lenders we work with have a minimum credit score requirement of 550. However, a personal credit score is just one factor they consider when you apply for equipment financing. The loan amount you qualify for depends on other factors, such as the value of the equipment, your time in business, and your annual revenue.

Since the loan is secured by the piece of equipment you’re planning to buy, some lenders grant loans to borrowers with poor credit. The main advantage of having a good credit rating is better interest rates and repayment terms. If you have a low credit score, you can increase your chances of getting better rates by making a down payment or offering additional collateral.

You can also bring in a cosigner. They’ll add a level of security and help you get approved for the loan. However, they’ll be responsible for repayments if you can’t pay.

The good news is that a cosigner may not be necessary. In our experience, most businesses qualify for equipment loans.

Get Financing for the Equipment You Need With Help From Clarify Capital

Having the right equipment allows you to be competitive in your industry. So, don’t let poor credit delay your company’s growth — take advantage of equipment financing options to get the equipment your business needs to operate. Upgrade your broken or old equipment and be confident to go after the projects that will grow your income and business.

If you have bad credit, you don’t have to comb through hundreds of lenders to find one who’ll work with you. Clarify Capital connects you to more than 75 lenders, and we do the work for you. Fill out your online application for equipment financing today!

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Get approved today and have money in your account within as little as 24 hours. No obligation -- prequalify without affecting your credit!