Having bad credit can prove to be a handicap not just for consumers but for businesses as well. Applying for a business loan is not easy as most banks and lending companies strictly require good or excellent credit. If you have a problem with bad credit, your loan application can be rejected if you submit it to the wrong lender.
One financing option is equipment leasing. If you’re in need of equipment, you can preserve your cash flow through leasing instead of purchasing. The good news is that there are leasing companies that offer special lease programs for customers with bad credit. By searching for these specific leasing companies, you can acquire the financing needed to obtain the equipment you need.
Typically, leasing companies that offer programs for bad credit require that all credit problems are in the past. Your credit report should also be free from tax liens and judgments. If you do have tax liens or judgements, they should be paid , of if in repayment make sure you have proof of your repayment plan and payments made. However, for businesses with a record of bankruptcy, they may need to wait for at least 3 years after being discharged before they can apply for an equipment lease.
What can you do to ensure the approval of your lease application? Consider these tips:
Be ready with an explanation. Upon submitting your lease application, provide a written explanation regarding the negative items on your credit report. What are the circumstances behind your bad credit? If you have been through bankruptcy, what lead you to that situation? This extra step will allow a prospective lessor to consider the circumstances behind the poor score. It can significantly help you in getting a lease.
Prepare the paperwork. Most lenders will want to see a financial statement , and up to two years of your personal and / or business tax returns. A prospective lessor will closely evaluate your financial information to make sure that you will be able to submit your monthly lease payments with any problems. Remember, because of your bad credit history, you need to prove that you will be able to make the monthly payment.
Approach the right lessor. Keep in mind, that not all leasing companies offer programs to businesses with bad credit history. Submitting a lease application to the wrong lessor will of course, lead to a negative response. Hence, it’s important to do your research carefully and approach the right lessor.
Do not submit multiple applications. Be careful about shopping around for lease quotes. Do not submit lease applications to different companies just to see which lessor will give the quickest response or which one will grant approval. You should be aware that your credit score drops each time a lessor pulls your credit. In addition, too many inquiries at such a short span time will only give rise to doubts and it could turn a yes into a no.
Once you obtain your equipment lease, be consistent with your monthly lease payments. See to it that you will be able to submit your monthly lease payments according to your lessor’s terms. Remember, a business equipment lease can help you create a good credit profile for your business.