Did you know that you can finance equipment with damaged credit? The only thing you have to ensure is that your credit woes are behind you.
Nobody intentionally plans to have blemishes on their business credit but unfortunately, this happens to a lot of businesses. The good news is that many leasing companies have made it possible for credit challenged companies to finance equipment. One of the disadvantages of this type of leasing is the fact that you will be charged higher interest rates. However, considering the fact that you need business equipment in order for your business to run smoothly, financial terms that are a little higher is still a better option than not any having equipment to run your business. One of the ways that you can finance equipment is through equipment lease financing. Applying for an equipment lease is much faster and easier than applying for a business loan. Moreover, chances of being denied a business loan are very high if you have a bad credit score.
How To Finance Equipment With Damaged Credit
Having established that getting a lease is an easier way to finance your equipment, you need to figure out how to get approved for a lease in the first place. Many leasing companies need you to submit your lease proposal, business plan, tax returns, and financial statements. Your credit history is another major factor but not to worry because there are many leasing programs for the credit challenged.
Many business equipment leasing companies have special programs where they help businesses with bad credit scores to finance their equipment. As a matter of fact, applying for a lease may just help to improve your bad credit history. You can speed up the process by having all your documents in order.
Your bad credit will still show in your credit report but if you have cleared all your debts, and you are in good terms with your current creditors, you should get approved for a lease. Unfortunately, if you have a record of bankruptcy and you have been charged recently, chances are very high that your application might be rejected.
However, you can still increase your chances of approval by including a letter of explanation along with your application. Your letter should address the steps that you have taken to ensure that you won’t be stuck in bad credit again. A potential leasing company will be interested to learn that you are capable of submitting your monthly lease payments on time throughout the entire lease term.
If you face credit problems during the time of lease application, you can look for a strong co-signer or consider doing an equipment sale-leaseback. This is whereby you use your existing equipment, that has been fully paid for, as collateral for a loan. You cannot use equipment that you are currently leasing for a sale-leaseback. Ensure the equipment is well maintained and still has value. Equipment such as computers is not suitable for a sale-leaseback because they lose their value very fast. Equipment that would be suitable for a sale-leaseback would be medical equipment, manufacturing equipment or construction equipment.
Things To Consider Before Applying For An Equipment Lease
Before submitting a lease application to a potential leasing company, make sure that they accept applicants who have a bad credit history. Most leasing companies prefer to finance equipment for businesses that have good credit scores because they consider them to be a less risky investment. To avoid rejection only send your applications to lessors that have programs that cater specifically to businesses that have damaged credit.
Remember that each time you send an application to the wrong leasing company, an inquiry is made to your credit report. If there are too many inquiries, your credit score drops by a few points. In addition, a lessor may reject your lease application if they find out that many leasing companies have been looking into your credit file. If you get several rejections, other companies may start to wonder about your credibility.
Equipment leasing is a good way to finance equipment for any type of business whether it has good or bad credit. It is favored generally because it is easy to obtain and takes a relatively short time to get approved. One of the companies that offer leasing options from real vendors to companies with damaged credit is LeaseQ. They only do a soft credit pull, which will not have an impact on your credit score.
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