There are times when companies face difficulties in their financial affairs that lead to bad credit. A bad credit history limits your chances of being approved for equipment financing regardless of whether the equipment will help improve business profits.
Traditional lending institutions such as banks may prevent you from getting the insurance you need. But there are specialist insurance companies that can look beyond your bad credit. These lending institutions can give you a second chance to take advantage of the equipment you need to grow your business by offering poor equipment credit financing.
Bad credit equipment financing for a growing business
Equipment finance is short-term insurances (about 3-5 years) that are given to companies specifically to purchase equipment for their operations. Equipment financing is an additional insurance which means that the equipment you have purchased can be repossessed if payments default. Since the insurance is issued with a guarantee, the lending companies consider it low risk and may offer a lower interest rate compared to a standard insurance.
To qualify for an equipment insurance, an individual must have a credit score of at least 600, have been in business for at least 11 months, and generate approximately $100,000 in revenue. If you have bad credit but meet the other two requirements, there is still a chance for you to take advantage of financing. It really depends on the lender’s assessment of your financial situation.
Equipment financing is an alternative for start-ups and small businesses to grow and develop especially for those who do not have enough capital to finance their purchases. And if you have a bad to bad credit score, giving you equipment financing gives you the opportunity to improve your credit score.
How to Improve Your Chances of Equipment Financing Approval Despite Bad Credit
You can increase your chances of getting approved for equipment financing. By finding ways to improve your credit standing and enhance your application to lenders, there is a reasonable chance that insurance companies will consider your insurance application. Here are ways to strengthen your application.
1. Apply with a cosigner with good credit standing. Lenders can consider your application if you are applying with someone with a better credit standing. The cosigner can provide security for the insurance given that the sender has equal obligations as the borrower.
2. View the other assets of the collateral. If you have other assets such as other types of equipment or even real property, you can offer it as collateral. Strengthens your application to secure the insurance.
3. Bigger payouts. Do you have enough cash for a down payment to significantly reduce the total insurance amount? If you are able to make larger down payments, lenders may consider you a poor financing candidate for equipment credit.
4. Evidence to show the business is growing strongly. Provide documents such as bank statements that show a good return for the past months. Lenders want to see a steady business growing, therefore, it is necessary to provide income statements and other documents to support your claim.
5. Seek professional help. With bad credit, lenders will make it difficult for you to get a insurance. They can even reject the insurance right after checking your credit score. But with the right help from insurance experts, you can increase your chance of getting the right lender who can look beyond your bad credit.