There is one aspect of running a business that you cannot avoid, particularly in the commercial industries. Businesses that require commercial machinery also require investments in the form of time, resources, and money. Most often, these business owners rely on loans or financing to cover the cost of the equipment needed to turn a profit.
Whether you are a startup founder looking to stock up your company with the bare necessities, or a well-known business owner wanting to replace your outdated supplies. Typically, banks use a credit score to determine whether or not a person is a dependable borrower. If you are a business owner with a low credit score, you may have a tough time being approved for a loan and obtaining the equipment you need to do business.
Liberty Financial wants you to know that you can still apply for a loan to finance business equipment with bad credit. Here’s how:
Apply with a co-signer. If you have poor credit, the first thing you should do when applying for an equipment loan or financing is to try to find a credible co-signer. If you default on your payments, it then becomes the responsibility of your co-signer to pay what is due.
Offer collateral. If you aren’t able to find a suitable co-signer, offering up collateral can help. Your collateral could come in many forms, including your property or any assets you have that are worth monetary value. These are used in exchange for a loan and as such, allow a lender to feel more secure in offering you financing. If you fail in making your payments as promised, they are able to seize your possessions.
Put down a large deposit. In an effort to look better to lenders, put down a larger down payment or security deposit. Doing so reduces the loan by a sizeable amount and will make the lender feel more secure about loaning the money. Only do so if you have the funds; if you put down too much up front and aren’t able to pay your monthly fee, it could have an adverse effect.
Show off your assets. If your business is already thriving and has started to turn a profit, use that information in your “pitch” to your lender. When you apply for a loan, show documented proof of such to your lender, as well as any sale projections or expected company growth. The better your company looks on paper, the easier it will be to obtain a loan for equipment.
Commercial business owners need equipment. If you’re a business owner with a low credit score, it doesn’t have to stop you from being able to afford the equipment you need to be successful. These tips will help give you the best chance at being approved for a business loan, regardless of your credit.