Practical Tips for Business Leasing for the First Time

Business leasing can feel overwhelming the first time your company does it. I’ve been in this business for 28 years, and from what I’ve seen, the businesses that get approved quickly and land good terms are the ones who have their i’s dotted and t’s crossed before they apply. Everyone else finds out why they got declined, usually in a way they didn’t see coming.

Here’s what actually matters.

Your personal credit still matters

Your personal credit is still a factor even though you are seeking financing for your business. While some lenders will take into consideration your business credit, the majority will still want to see your personal credit.

To qualify for a “corp only” lease or loan you need to have well established business credit. They will want to see multiple lines of credit on your business credit report, with a payment history of a few years.

Prior to 2008 your business credit could get you approved and was a work around for a business owner with bad credit. But after the big mortgage crash, many finance companys decided they will do a corp only deal, IF the customer also had good personal credit. Even if they were not asking for a personal guarantee.

Stop shotgunning applications

I get why people apply to all the lenders that seem to fit. They want options. But every lease application for equipment leasing is a credit inquiry. Each inquiry can lower your score. Most lessors will get nervous if they see multiple inquiries in a short time frame. They will wonder why everyone else declined your application.

One clean application beats five random ones every time. Do your homework first — what is their criteria for approvals. Do you fit them? If not, don’t waste your time. If you can’t find a lender on your own. A leasing company like Leasefunders.com can help you find the right one.

Know the difference between lease types before you sign anything

Most lessors are offering a number of different lease structures — FMV, $1 buyout, and everything in between. Be sure to understand the difference before you sign, and ask your lessor to explain the terms of the proposed lease in plain terms before you agree to it, not after.

These lease types differ significantly. With an FMV lease, your payments are typically lower because you’re not paying toward ownership of the asset — you’re essentially paying for its use while it’s in service, and at the end of the term you return it, renew, or buy it at its fair market value. A $1 buyout lease costs more per payment, but at the end of the term the equipment is yours to keep for that dollar. This type of lease functions more like a loan.

Prepare Required Financial Documents in Advance

Depending on the dollar amount of the equipment you want financed, you may need to submit financial documentation. In most cases to get the ball rolling you will need an application and 3 months bank statements.

But if you need more than $50,000 they will want 1 or 2 years tax returns. Depending on how your business is set up and how long you’ve been in business, the lessor may also request your personal tax returns.

The larger the dollar amount, the more financial information they will want to see.

Have all requested documentation ready to go before you apply for financing.

Address Credit Issues Before Equipment Leasing Applications

If you have credit problems either fix them before applying or be prepared to provide documentation explaing your situation. In most cases if approval is possible, business owners applying for bad credit equipment financing should be prepared to provide additional security in the form of additional equipment, real estate, or larger security deposit.

Take a moment to talk to the bank before you apply. Make sure they work with someone with your credit problems. If you have filed for bankruptcy, it should be discharged at least 3 years with the business owner having started to rebuild their credit with no new late payments.

Here’s something to keep in mind: write a letter of explanation to include with your application. It should cover what went wrong and what you’ve done since to fix it. In most cases, underwriters review these letters, and they can mean the difference between approval with conditions and a denial of credit.

Tell them why this equipment matters to your business

Whether or not your financials alone will persuade the underwriter, you should state why the equipment is needed by your business. This can be an increase in capacity, a new revenue source, or support for growth your business is already achieving. Your financial data still forms part of the application, but now it sits inside a story the underwriter can actually follow. Include any contracts you will be able to fulfill once you have the equipment.

The questions to ask before you sign

Before you commit to any lease, get clear answers on:

Are there additional costs — maintenance, insurance, end-of-term fees
What happens at the end of the lease — return, renew, or buy
Is there a personal guarantee required
What’s the penalty for early payoff or default

First-time business equipment leasing does not have to be a wild-goose chase. Knowing your credit rating, selecting the right type of lease for your situation, have the necessary documents prepared, and candidly discussing your situation with lessors. Taking these steps will get your application processed in the best light possible.

Updated 8/13/2026