Bad Credit Equipment Financing

Many small businesses rely on equipment to function. You might be a software firm that needs laptops or a transport company that needs forklifts. So, what happens when these essential items break down? In many cases, it might not be realistic to have the cash to purchase a replacement outright. However, without them, you will not be able to run your operation.

This is a dilemma faced by dozens of small business owners each year. Thankfully, there is a solution. You might want to consider equipment financing. But what is this approach, and will you be able to access it if you have bad credit? Let’s answer these questions so you can decide if this process is right for you.

What Is Equipment Financing?

The first thing that we need to understand is what equipment financing is and how it works. This is a type of loan, taken out specifically to help the business owner purchase new equipment. In this case, you will get the money you need to purchase the items you need. If you default on the loan, the equipment can be repossessed to pay for part of the debt. During the life of the loan, you will need to make monthly repayments. By the time you have finished making payments, you will own the equipment outright.

Should You Lease the Equipment Instead?

In some cases, it might make more sense for you to lease equipment, instead of purchasing it. For example, the technology in your industry might evolve quickly. By the time you end up paying it off, it might be obsolete, and you’ll need to upgrade again. Leasing will give you more flexibility, allowing you to swap out the equipment when something better comes along. In other cases, you might not be able to afford the down payment for an equipment financing loan. If this is your circumstances, it might be easier financially to lease, rather than buy.

Owning the equipment can have a few benefits. For example, some leases might limit what you can do with the items. Buying it will not have as many restrictions. This will allow you to customize the equipment to your operation. Also, if you plan to have the equipment for a long time, it can be more economical to buy it. Once you finish paying the loan off, you will not have any more costs. If you choose to lease, you will still need to make monthly payments for as long as you are using the equipment.

What Are the Terms Of The Equipment Financing Agreement?

The terms of the agreement will often depend on your unique circumstances. The cost of the item, your monthly earnings, and your credit will all need to be taken into considerations. Generally, though, equipment financing loans will last for between six to 24 months. However, you might be able to discuss this with the lender, to get terms that better suit your business.

The amount that you will be able to apply for will vary, depending on your needs. When you choose an alternative financing option, like South Florida Finance Group, you will be able to apply for between $50,000 to $1.5 million. This will give you plenty of money to get all the equipment you need.

The interest rate is the biggest variable. It can be between six to 20 percent, depending on your circumstances. As we will see later, your credit can impact the interest rate. The type of equipment that you are purchasing can also impact the interest rate.  For example, if the item can easily be sold, you might be able to get a better rate. Generally, the interest rates of this type of loan will be lower than taking out a standard loan from the bank.

What If You Have Bad Credit?

For some types of loans, you will need to jump through a series of hoops. One of the biggest being having an excellent credit history. This is often one of the first things that traditional lenders will look at. If you don’t have good credit, they will refuse to give you the money, as you pose too much of a risk. As a result, it can be hard for some small businesses to get the funding they need.

However, this doesn’t have to be the case when you are applying for a heavy equipment loan. Because the equipment you’re buying acts as collateral, companies will be more willing to give you the money. The best place to investigate will be an alternative financing company, like the South Florida Funding Group. They will be able to look beyond your credit history, making them more likely to provide a loan. However, bad credit might impact the interest rate. Poor credit history might mean that you have a higher risk of defaulting on the loan. To compensate for this risk, you’ll often be charged a higher interest rate.

It should be noted that lenders for equipment financing consider more than just your credit. They will also look at your overall business. Ideally, they would like to see a business that has a solid turnover. They will also want to see that you have been in business for at least six months. However, if you don’t meet these requirements, don’t stress. Many alternative funding lenders tend to be very flexible, adjusting to suit your needs.

If you are still concerned about your bad credit, there are a few things that you can do to increase the chances that your application will be approved. First, you might want to cosign with a person with better credit. This will make you seem like a safer prospect, so you’ll be able to get a better rate. You might also want to offer a larger down payment. The more you can offer as a down payment, the more favorable the loan conditions. Another strategy to investigate is offering more items as collateral. Finally, you might want to hold off applying until you can approve your credit.

What Documents Do You Need to Apply For Equipment Financing?

If you are considering taking out a heavy equipment loan, there are a few documents that you’ll need to present. First, you will need to show your driver's license, this will help verify your identity. Then, you will need to provide business records. For example, you will need to provide business bank statements and tax returns. This can give the lenders a better idea of what state the business is in. You will also need to provide a personal credit score. Finally, you will need to provide a quote for the equipment you want to purchase, so they know how much money to send you. South Florida Funding Group will help you gather these documents, making the process of applying for a loan easier. This will ensure that you can get your equipment fast.

What Are the Benefits Of Equipment Financing?

Hopefully, you now have a better idea of how equipment financing works. There are a few reasons why small business owners might decide that this approach is right for them. First, you will not need to provide any upfront fees. This can make it easier for you to get the items that you need. Instead, you will be able to use the equipment that you are purchasing to secure the loan. Alternatively, some lenders might offer an unsecured loan, which means you do not require collateral.

You will also be able to choose which vendor you want to purchase from. This isn’t the case when you decide to lease, as only a limited selection of brands will be available to choose from. Because of this, you will be able to make sure that you are getting the right equipment for your industry. This is especially important if you are in a niche industry, with specific requirements that need to be met.

Also, many alternative funding providers tend to offer flexible loans. This makes it easier for you to make repayments when it suits you. This will ensure that your business will be able to cope with the loan.

Finally, when you choose an alternative lender, you’ll be able to get fast cash. This is essential when you are dealing with vital infrastructure. The longer it takes to replace these important pieces of equipment, the bigger the impact on your organization. In most cases, you will be able to get the money you need within days, so you can get the gear you need quickly.

Contact South Florida Funding Group

When a vital piece of equipment breaks, it can be very stressful. This is especially true if you have bad credit and will struggle to get a loan from a bank. Thankfully, you can turn to alternative equipment financing. In this model, you will get a loan to purchase the equipment. The items you buy can then act as collateral on the loan. As a result, many alternative lenders will be willing to overlook bad credit to give you the funds you need to replace your equipment. So, talk to the team at South Florida Funding Group today to find out more about this approach and how it can work for you.