3 Crucial Facts About Credit Score in Equipment Loans

9 min read
Credit Score Concept. Businessman Pulling Scale Changing Credit

It’s often thought that having a bad credit score keeps businesses from securing equipment loans, or any business loan. However, that is not the case in the current market. If you are a construction business owner who has spent more time building their business rather than fixing old credit mistakes, good news. You are not automatically locked out of the lending process. You don’t have to use all of your operating cash for equipment when other solutions are available. Alternative business lenders can help your business grow despite having a negative credit history.

All sorts of businesses, from construction to retail to medical, require equipment loans to build their operational capacity. This increased capacity brings even more profits and makes them efficient in doing their services. We know poor credit scores don’t tell the entire story. Equipment financing can make a critical difference in your continued success. Before you consider selling your assets or equity, consider these lesser-known facts regarding bad credit equipment loans.

Credit Score Loans

But First, What is Equipment Financing?

In a nutshell, equipment financing is a type of loan where lenders provide you with a lump-sum of money which you can use to purchase equipment. What this does for businesses is that it provides a working capital they can use to obtain machinery that they otherwise wouldn’t afford without financing. With the cash on hand, they can take on expensive investments that ensure a greater ROI.

With equipment financing, small businesses won’t have to present a guarantee for the loan. The equipment they acquire using the money will serve as the collateral for the loan. This means that when business owners fail to make repayments, banks or lenders have the right to take the equipment. They will sell the repossessed item and use the money to pay the loan back. Remember, if the cash they get from selling the equipment doesn’t cove

Credit Score

r the loan, you still have the responsibility to pay the balance.


Equipment Financing and Credit Score

It’s a common belief that people with a low credit score cannot qualify for equipment financing. While that was true before, lenders today have become more flexible. This means, even those without a stellar credit score can qualify.

Here’s what you need to know about credit when applying for equipment financing:

Good Credit vs. Bad Credit

It’s ok if your credit isn’t stellar. It doesn’t even need to be “good.” Lenders are the ones who get to make their lending decisions based on any number of factors they choose. The ultimate decision comes down to whether they believe they will get their investments back. So, this may mean having a good financial record and greater ROI.

Some lenders are incredibly strict and base much of their decision on the credit scoring system. Others, however, have flexible lending policies that look at a variety of indicators. This helps them determine which businesses to support. While a traditional bank is likely to say “no” to a bad credit applicant, alternative lenders search for the reasons to say “yes.”

Plentiful Alternative Lending Options

There’s more than one way to skin a cat. Yes, it’s an old saying, but it applies to the world of alternative business lending. There are all sorts of equipment loans available to you, so it’s best if you explore each of your options individually. This will help you determine whether the terms offered would fit your capacity to repay or not.

At SMB Compass, we have heavy equipment financing for both new and used equipment. Aside from that, we also offer operating lines of credit, asset-based loans, multi-year term loans, and more. We specialize in creating a package of products to fit your immediate needs and potential future needs. We make sure that you’ll be getting these all while working towards rebuilding your credit.


Equipment Purchases From Your Chosen Vendors

You retain the right to choose your vendors. Be sure to choose your preferred vendor. If you worked with an alternative lender in the past (or are considering working with one now) who forced you to buy from a list of vendors, you should know this isn’t standard practice in the lending industry. Some lenders insist on purchasing from their “qualified” vendor pool. All this does is limit your options and ties your hands when it comes to getting the equipment you truly need.

Strive for Efficiency With Equipment Loans

Equipment loans provide a myriad of benefits for many business owners. For one, it makes your business efficient in a way that you get to obtain expensive equipment without breaking the bank. Secondly, it enhances the quality of service you provide your clients. Most importantly, good equipment makes the difference between landing a big project and losing money.

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