Equipment Financing with Bad Credit in 2024

Can you get equipment financing with no credit check?

Lenders will check your credit score as part of the process of securing equipment financing. But don’t let this deter you! Remember, your credit score is just one piece of the puzzle. Lenders also consider other factors about your business. So, even if your score isn’t perfect, it doesn’t mean you’re out of options. 

Why equipment financing requires a credit check.

Your credit tells lenders how likely you are to repay what you borrow. If you have bad credit, they’ll view you as a risky borrower and may be more hesitant to lend to you. The good news is that many lenders have lenient requirements and serve borrowers with bad credit. 

These lenders often consider other factors like your annual revenue, profitability, cash flow, and outstanding debt when deciding whether to approve you for an equipment loan. Keep in mind, however, that if you have a bad credit history you might have to settle for a higher interest rate or make a larger down payment than a business owner with good or excellent credit.

Bad credit equipment financing options.

The following lenders offer equipment financing with minimum credit score requirements of 600 or below.

How to increase your chances of approval.

If you have bad credit but need to borrow money to fund the cost of your business equipment, certain strategies will boost your likelihood of locking in construction and heavy equipment financing, restaurant equipment financing, and other types of business equipment financing. Here are some ideas to consider.

Apply with Online Lenders

Compared to traditional lenders with brick-and-mortar locations, online lenders are usually more flexible. You’ll find that they are often open to lending to borrowers with less-than-perfect credit scores. Do your research and find several online lenders who specialize in bad credit equipment financing. 

Consider Equipment Leasing

It’s important to understand equipment financing vs. equipment leasing. By doing so, you can decide whether equipment leasing makes more sense for your unique needs. With an equipment loan, you make a down payment and finance the rest of the equipment cost. 

An equipment lease, on the other hand, lets you rent and use the equipment for a specific period. While most businesses return the equipment at the end of the lease, some decide to buy it at fair market value or explore other options outlined in their agreement. 

Offer Additional Collateral

In a typical equipment loan, the equipment itself serves as collateral. Since the lender can seize it if you default, they take on less risk. If you have bad credit, you might want to offer additional collateral, like your commercial vehicle or inventory, to help secure the loan and reduce risk for the lender. Just make sure you feel confident that you’ll be able to repay what you borrow or you might lose a valuable asset.

Increase Your Down Payment

The larger your down payment, the smaller the loan you’ll need to cover the cost of your equipment. If possible, save up for a hefty down payment so that lenders are more open to lending to you with bad credit. Not only will a larger down payment position you as a more attractive borrower, but it can also save you hundreds or even thousands in interest fees and lower your overall cost of borrowing. 

Perfect Your Business Plan

Your business plan is an important document that shows lenders who you are and what you plan to do with the funds. Take the time to look over and improve your business plan so that it accurately reflects your business acumen and clearly highlights how an equipment purchase will help your business. 

Apply with a Cosigner

A cosigner is someone with strong credit, a stable income, and significant assets. If you apply for an equipment loan with a cosigner, lenders will consider their financial situation in addition to yours. This can increase your chances of approval and potentially lead to lower rates and better terms. However, the downside of this strategy is that, if you don’t make your payments, the cosigner will be responsible for them.

Equipment loans for bad credit are available.

Don’t let bad credit prevent you from locking in the equipment loans you need. 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. Best of luck in your search for bad credit equipment financing.