Short-Term Financing Is Used To Start A New Business How to Grow Your Business With a Bad Credit Equipment Finance

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How to Grow Your Business With a Bad Credit Equipment Finance

There are times that businesses face difficulties with their finances resulting in bad credit. Bad credit history restricts the possibility of approval for equipment finance if the equipment helps improve business profitability.

Traditional lending institutions like banks may deny you the loan you need. But there are specialized loan companies that can look beyond your bad credit. These lending institutions can give you a second chance to get the equipment you need to grow your business by offering bad credit equipment financing.

Bad credit financing tools for growing businesses

Equipment financing is a short-term loan (about 3-5 years) extended to businesses specifically to purchase equipment needed for its operations. Equipment financing is a collateralized loan that means the equipment you purchased can be repossessed if payments go into default. Since the loan is issued on collateral, lending companies see it as less risky and can offer lower interest rates than standard loans.

To qualify for an equipment loan, one 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 avail finance. It really depends on the lender’s assessment of your financial situation.

Equipment financing is an option for the growth and development of start-ups and small businesses, especially for those who do not have sufficient capital for their purchase. And if you have a bad credit score, providing equipment financing gives you a chance to improve your credit score.

How to improve your chances of getting approved for equipment financing despite bad credit

You can increase your chances of getting approved for equipment financing. By making ways to improve your credit standing and strengthen your application to lenders, loan companies have a fair chance of considering your loan application. Below are ways to strengthen your application.

1. Apply with a cosigner with good credit standing. Lenders may consider your application if you are applying with a good credit standing. A cosigner can provide security for a loan to ensure that the consignor has the same obligations as the borrower.

2. Present other assets for collateral. If you have other assets such as other types of equipment or real estate assets, you can offer it as collateral. This will strengthen your application to secure the loan.

3. Big down payment. Do you have enough cash to put toward a down payment to significantly reduce your total loan amount? If you are able to present large down payments, lenders may consider you a candidate for bad credit instrument financing.

4. Evidence that the business is going strong. Provide documents such as bank statements showing good income for the past month. Lenders want to see a growing and stable business, therefore, it is necessary to provide income statements and other documents to support your claim.

5. Seek professional help. With bad credit, lenders will give you a hard time getting a loan. They can reject the loan immediately after checking your credit score. But with proper help from loan experts, you can increase your chances of getting the right lender who can look beyond your bad credit.

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