Having bad credit can make obtaining business financing almost impossible. Most banks want their clients to have good to excellent credit and strong debt to income ratios.
If you fall outside of their rigid credit guidelines, they don’t care how strong your company is. The answer is no. That’s why more and more business owners have turned to equipment leasing.
Leasing Programs For Business Owners With Bad Credit
If you have bad credit, you’ll be glad to know that there are equipment leasing companies that offer lease programs that are specially designed for business owners with low credit scores.
What You Should Do Before You Apply For An Equipment Lease
Check Your Credit
Before applying for a lease, check your credit report and make sure everything is being reported correctly. Ideally, all your credit problems will be in the past.
It’s hard to convince a bank that you will pay back your equipment lease when you are not currently paying any of your other debts.
If your credit is truly terrible, you may want to consider hiring a professional credit repair company to at least get your score to a 590.
If you have a lot of credit card debt, you will also want to pay down as much as possible. Credit card debt is a major cause of bankruptcy. So a bank will see you as an even greater risk if you have a lot of outstanding credit card debt.
If you have filed for bankruptcy, most leasing companies will reject your application if the bankruptcy is recent. They like to see that your bankruptcy was discharged at least 3 years prior and you have rebuilt your credit.
Explain Why You Have Bad Credit
Be prepared to submit a written explanation for what the bank will find on your credit report. In the same letter, it would be wise to point out the steps you have done to improve your credit history and to avoid credit problems again.
Of course, you will need to prove that you are capable of paying your lease through submitting several months of bank statements and /or your most recent tax return.
Research Your Prospective Lender
Before submitting your application to a leasing company, it’s very important to make sure that this lessor accepts applicants who have bad credit.
When I was working for the bank I was always surprised by how many applications we got that didn’t’ meet our most basic of requirements.
When you are looking for specialized financing such as bad credit equipment leasing or even start up business equipment leasing. You need to make sure the finance company you are working with accepts your type of deal!
I recently had a start up business with great credit that we almost had to decline because of excessive credit inquiries. When I asked him why he had so many, he said it was because he applied online to a lot of places and got turned down due to the fact that he was a start up business.
His credit score had dropped close to 30 points due to excessive inquiries.
When you start off having bad credit, you don’t want to risk lowering your score. Take the time to call or email your prospective lender before submitting a credit application.
What You Will Need To Obtain A Bad Credit Equipment Lease
Generally, equipment leasing companies will require the following:
- Equipment lease application
- 3 months bank statements
- letter of explanation for your credit
- invoice or list of equipment you want to buy
- tax return for any lease amount over $25,000
Having bad credit doesn’t mean you won’t be able to obtain financing. The rates will be higher than what is offered your good credit counterparts and the bank may only be willing to finance you for 36 months instead of 60 months. But bad credit equipment leasing is attainable for most business owners.
Or if you prefer, feel free to download our equipment lease application by clicking here