It’s “all smiles” for the business owner when cash flow is perfect, and cash reserves are enough to fix any unanticipated financial problems. But a time comes when you hit rock bottom and seeking funding is your only way out. And when you begin the quest, one thing that clearly dawns on you is that credit score is a primary determining factor of your company’s financial fate.
Most loan providers assess credit performance as part of their underwriting process before they accept your funding request. Fortunately, the rapid changes in the micro-business funding space have brought more business loan alternatives in the market than ever— with lenient lenders willing to fund small companies without basing the entire argument on credit scores.
Equipment Financing is one form of business funding that you can obtain without perfect credit. However, while it is easy to get hands on one, Is the rumor that lenders are offering no credit check equipment financing true?
NO, it isn’t.
Honestly, no serious lender will offer money to a business without going through the owner’s (or the company’s) credit score.
Why Personal Credit is a bone of contention
It can be frustrating to realize that most small business funding solutions require credit checks. Therefore, having no credit records or bad credit disqualifies you from a range of financing products.
So why do nearly all lenders care to scrutinize your credit?
Personal credit is a figure that shows how responsible and reliable you are with your funds. In essence, it tracks your history and conduct with financial accounts— including the number of credit accounts under your name, your outstanding debts on the accounts, and much more. Above all, credit scores give micro-business lenders a clue on how often one pays their credit account balances in good time, and in full. This is particularly important to most lenders.
But the fact that there’s “no credit check” funding options for equipment financing out there doesn’t mean a dead end for you when looking to source extra money to purchase business equipment. Here are what your options may be.
Equipment Financing: A collateral-based product
Equipment loans offer bad credit borrowers a loophole which gives hope to business owners in search of no credit check equipment financing. Equipment financing is generally a collateralized loan. Funding with collateral is where the borrower pledges an asset against a loan as security for the funding’s settlement.
Collateral refers to any business or personal assets including real estate, cars, equipment, deposits, etc.
With equipment financing, the item you’re buying with the funds you get, collateralizes the loan. For instance, if you buy a new ATM, the equipment loan amounts typically to 100% of the machine’s value or perhaps a large percentage of it. You are free to use your ATM while repaying the equipment financing in monthly installments.
However, if things go south and you can no longer continue making your monthly payments, the lender could seize the ATM and resell it to recover their losses incurred due to missed payments.
In a nutshell
There’s really no credit check equipment funding. This idea behind collateral is what makes asset-based financing unique and easy to get hands on.