Heavy Equipment Financing With Bad Credit
If you’re interested in purchasing heavy equipment but have credit issues, you may be worried that you won’t be able to secure financing for these purchases. Heavy equipment financing with bad credit isn’t always easy. Heavy equipment tends to be valuable, which means that you’ll be asking a lender to offer you thousands or more. Thankfully, there are a number of ways you can secure the financing that you need.
Equipment Lenders Like Neal Business Funding place more emphasis on the value of the equipment than your credit score. As long as the value of the asset is enough to have some equity in the deal, Neal can usually get you the money you need regardless of your credit. This is the opposite of most types of loans you usually experience.
Heavy Equipment Financing Companies
Most Heavy Equipment Financing Companies specialize in certain types of equipment or machinery. Heavy Equipment is probably the most popular type of equipment financed or leased but the term equipment financing actually encompasses all kinds of items that a business could need. Computers, Office Equipment, Vehicles, Manufacturing Equipment and even software are often financed by equipment lenders.
Some also specialize in the way they approve their applications. If you talk to enough Heavy Equipment Financing Companies you will see that some focus on applicants that have excellent credit and some on applicants with less than stellar credit. Some will focus purely on the cash flow that a business generates and some will only focus on the value of collateral. As you can see there are several different options to obtain heavy equipment financing with bad credit.
Look Into Leasing
Instead of purchasing your equipment outright, you may want to look into leasing. A capital lease is a type of lease agreement in which the lessor agrees that they will transfer ownership rights of the asset being purchased to the lessee after the lease term ends. In other words, a lease will provide you with access to an asset for a period of time for as long as you make payments. When the lease ends, you will have an option to purchase the asset at a discounted price at the end of the term .
Securing a capital lease when you have bad credit can be difficult, but it’s certainly not impossible. Not every equipment lender even looks at your credit. If you’re a business owner, and your business is currently thriving with good cash flow, there’s a good chance that lenders will be able to overlook your credit issues. You may also want to seek a cosigner or offer some sort of collateral.
Typically, it’s easier to secure a lease when you are purchasing equipment that holds its value over time. Because construction equipment and machinery both tend to hold their value well, you’ll have an easier time finding lenders that will consider leasing to someone with poor credit.
The cost of leasing can vary based on a number of factors. The cost of the equipment will determine your rates, as will the age of the equipment that you are buying. Your credit score will also impact the interest rates that are available to you. Typically, lower credit scores translate into higher interest rates.
Learn More About Asset-Based Direct Lease Programs
Your credit score doesn’t have to determine whether or not you are eligible to lease expensive heavy equipment. If you have major credit issues, such as judgments or bankruptcy, but also have a number of assets, a leasing program like this may be ideal for you.
These lease programs look at your assets rather than your credit so they are perfect if you are looking for heavy equipment financing with bad credit. In some cases, you may not even have to undergo a credit check. However, if you go this route, your assets may be used as collateral. If you are unable to make loan payments, those assets could be seized.
Explore Sale And Leaseback Options
If you own a business that is short on working capital, and you are struggling to purchase additional heavy equipment, you may want to look into sale and leaseback options. This type of financing has three components. First, you will sell the equipment you own to a financing company. From there, they will lease the equipment you sold back to you so that you can continue to use it. You will make monthly payments to the financer to cover the cost of your lease.
Virtually any small business owner with the right equipment qualifies for a leaseback, even if they have major credit issues. These types of loans also tend to have longer terms and lower payments, which makes them a more affordable option than traditional leasing.
One of the biggest advantages of leasebacks is that they offer flexibility. Because you’ll be selling your equipment to a lender, you’ll be able to instantly improve the liquidity of your business. You can use that working capital to pay down debts and improve your credit, to purchase additional equipment, or get through a slow period. Since many types of heavy equipment hold their value over time, you may be able to get a lot of money for the equipment that you sell.
Another advantage is that these types of loans tend to be tax-friendly. You may be able to classify your lease payments as operating costs, which will allow you to write them off when you’re filing your taxes. Not everyone looking to finance heavy equipment will qualify for one of these loans, but it’s certainly an option that’s worth exploring.
Looking Into Equipment Term Loans
A term loan is a financial loan that requires you to make regular payments over a set term. It’s common for term loans to last for 10 years, but 20 and 30-year loans are also available. When you are securing a loan like this to cover to purchase of heavy equipment, it may also be described as an equipment loan.
Term loans typically include some sort of unfixed interest, which means the total balance you’ll be paying will be higher than the value of the equipment that you’re purchasing. There are numerous factors that can impact the interest rate of your term loan, including your credit score, your location, the value of the equipment you’re financing, the term of the loan, and the current lending market.
If you’re able to make a downpayment on the equipment you are buying, you’ll be able to lower the amount of your loan, which means both your payments and your interest rates will be higher. Putting down a significant downpayment can also make it easier for you to secure a term loan when your credit is poor.
While some lenders will not offer term loans to borrowers with bad credit, there are lenders that are willing to work with people with significant credit issues. Banks tend to have more stringent lending standards and may not be willing to approve a loan for valuable equipment. Because of this, you may find that working with a private lender is a better option.
There are a number of options for heavy equipment financing with bad credit. If you need to purchase expensive equipment, and you need to secure some sort of loan, you should take the time to look at the different financing options available to you. Make sure you are able to purchase the equipment that your business needs.
