Certain businesses are heavily reliant on expensive equipment to help run their operations at full capacity. Technology has helped us produce larger quantities in less time, and also reduces the chances of error and allows employees to do more meaningful and less mundane work.
However, such equipment is incredibly expensive. Most businesses cannot opt for buying them out of pocket. While loans might seem like the obvious choice of financing such leases or purchases, businesses with poor credit struggle to obtain loans.
Is It Possible To Get A Lease For Equipment With Bad Credit?
Loans to lease equipment tend to be secure since they are backed by collateral. While secured loans are assumed to be less risky for lenders, providing loans to less creditworthy clients is always risky. There’s a high chance the client will default on payments, and you end up in possession of the collateral. Collateral is less liquid to lenders and therefore takes them more time to convert it into cash. Keeping these factors in mind, most lenders have a minimum credit requirement in the mid to high 600s for equipment loans.
Here are some tips to help you get a lease on equipment with poor credit:
Improve Your Credit Rating
Working on your business’s credit rating has more advantages than just securing an equipment loan. It improves the reputation of the business, especially in the eyes of investors and lenders (private lenders and traditional banks).
It may seem difficult to lower your credit score in a short amount of time. However, credit reports tend to have many mistakes. Go through each item on your credit report, note down all the negative items and errors—file disputes to remove all such errors—which will raise your credit score.
To further work on your credit score, make sure all payments are made on time. Don’t rely on credit to pay for business expenses.
Get A Co-Signer
Don’t let your business be defined by its credit score. Get the help of a trusted party to cosign a loan with you. This adds an additional guarantee to the loan, and lenders will be more likely to provide the funds. When cosigning, you need to make sure you are able to make all the debt repayments on time, or else it will affect the co-signer too.
Asset Based Lending
Asset Based lending allows commercial clients to apply for loans based on the value of the collateral they are able to offer. Collateral is a form of guarantee offered to the lender to secure the loan. In the event of non-payment, the underlying asset is handed over to the lender. Collateral can be in the form of accounts receivables, inventory, machinery, or even real estate.
With asset based lending, applicants can get a competitive interest rate on their loan as well, making it cheaper for them to pay back. Paying such a loan back on time will also improve the credit rating of the business.
Global Capital Partners Fund is a private lending firm based in New York. They offer hard money loans to businesses in Newark, NJ, Tampa, FL, Columbia, SC, Atlanta, GA, and many other cities. Get in touch with their agents today for hard money loans.