The lack of equipment funding can be critical to keeping your business functioning. You may need it for expanding your business or keeping up with the latest trends in your field and being able to meet growing demand. However, what can you do if your credit makes it impossible or challenging for you to obtain an equipment loan from a traditional source? Let’s see.
Equipment Loan
Thanks to working capital for equipment, you can obtain essential items without the need to pay large amounts upfront and using the last cash you have. However, there is a thing to focus on before applying for this type of financing: the majority of lenders rely on good credit scores to give approval.
By the way, the interest rates vary from 8% to 30%. The lender will look at your credit history, time in business, your revenue and the equipment to decide on the rate. If you’re an established business with excellent cash flow, expect to be offered a rate below 8%. As for the credit score, FICO, the most famous credit reporting agency, defines 300 – 629 as bad credit.
How to Get Equipment Financing
How can you increase your chances of getting approved for equipment funding? Let’s see how:
- Collateral
The equipment you’re going to purchase acts as collateral, so if you fail to pay back the loan, the provider can use that equipment as collateral.
- Offer More Than 20% Down Payment
As a rule, lenders require a 20% down payment. Consider offering more.
- Provide a Well-Thought Business Plan
You can create or update the existing business plan to submit it to the lender, thus increasing your chances.
- Show Strong Cash Flow
This is an important factor you shouldn’t leave in ignorance.
- Cosigner
Consider a cosigner, a person who’s ready to make repayments in case you aren’t able to do that.
What if you need additional help apart from the mentioned points so you can obtain equipment financing? No need to worry. Just consider turning to an expert business funding provider like First American Merchant in the high risk field when in need of an equipment loan. FAM is an A+ rating company by the BBB and offers the cheapest possible rates in the space.
So, equipment financing is a small business loan that you can use to purchase machinery and equipment necessary for your business. Bad credit merchants can find it intimidating to get approved for this type of capital, and that’s where respectable alternative online lenders come into play.