Bad Credit Equipment Funding

When attempting to start or grow a business, it’s disheartening to learn that nearly everything is based on the health of our credit history/score. For those with bad credit, they feel left out in the cold. Often, small business owners continue with damaged equipment because they don’t have the money or credit to buy new equipment. Not only does this affect the morale of employees, but it also affects the level of service for customers.

Thankfully, there are solutions, and we can help with bad credit equipment financing at South Florida Funding Group. In this guide, you will learn all about this form of alternative business funding and how it could help your business today!

What is Equipment Funding?

First things first, what exactly does equipment funding mean? As the name suggests, it’s the process of obtaining capital to purchase equipment for a business. For example, a small cafe may need money to invest in a new coffee machine. Rather than having to pay their own money, they secure external funding and can spread payments over a period instead of risking turbulent cash flow.

With the new equipment tax codes, the good news with equipment funding is that we can actually now save lots of money through this method. Even with bad credit, you may have opportunities to get your hands on the equipment you need to push the business forward.

Importance of Good Credit

You’re probably reading this because most traditional lenders look at your credit history before giving out money for new equipment. Although the reliance on credit is frustrating, there’s a very important reason why it plays such an important role. Essentially, a low credit score tells lenders that an individual has struggled to repay loans in the past. If lenders were to give money away without considering the history of the individual, the economy would collapse, and people would build more personal debt than they could handle.

With a good credit score, it tells lenders that the person is responsible and shouldn’t encounter any problems repaying loans. On the other hand, a bad credit score makes it hard for lenders to trust the person in question. All in all, your credit history is important because it gives lenders a quick insight into your financial history.

Bad Credit Equipment Funding - Financing and Leasing

Thankfully, there are now solutions for people and businesses with bad credit and it comes through alternative funding. As a business funder, South Florida Funding Group helps many businesses to push towards their dreams every year (even if their bad credit prevents them from accessing traditional forms of finance).

When it comes to equipment, there are two options:

• Financing - With equipment financing, you get a loan to pay for the equipment and pay this back over time. Every month, you pay an amount towards the overall sum. During this period, you own the equipment and it is used as security in case you miss payments. Once everything is paid, the equipment is yours for good.

• Leasing - On the other hand, you won’t own the equipment when choosing the leasing route. Instead, you’re renting the equipment from the supplier and paying a fee every month. At the end of the term, you’ll have an option to pay an additional fee to own the equipment fully.

As you see, the main difference between the two options comes with ownership. You will only own the equipment through financing, and it’s used as collateral should you fail to make payments. If you miss payments when leasing, the supplier is likely to take the equipment back and cancel the contract.

How does this form of alternative business funding work? Most applicants receive a decision within 24 hours. Rather than waiting and then feeling disappointed with a rejection, you’ll know quickly, and this helps with planning. In terms of the requirements, with South Florida Funding Group we ask that you’ve been operating for more than three months and have monthly revenues of above $6,000.

Fortunately, one of the benefits of bad credit equipment funding is that the application process is incredibly simple. As long as you’re asking for less than $250,000, you fill out a single page, attach bank statements for the last three months, and then relax. Finally, the repayment terms depend on the loan itself. However, the minimum and maximum tend to be six months and 24 months respectively.

Benefits of Bad Credit Equipment Funding

Why should you find a business funder in this way? What are the benefits of obtaining finance for your equipment through a bad credit lender?

1. Available to All Businesses

First and foremost, you should know that equipment funding is normally available to businesses of all shapes and sizes. Whether you’ve been in business for one year or twenty, we all need equipment as a business. Sometimes, it’s not worth disrupting the cash flow just to get this equipment. Assuming you meet the minimum requirements, equipment financing is available where other forms of commercial funding fail.

2. Simple Application

Another advantage of choosing alternative business funding is that the application process is quick and easy. Even with bigger loans, the application shouldn’t take too much of your time. This way, there’s not much admin and you can go back to doing what you love. With traditional business funding, it can sometimes feel as though we need special training just to complete the application forms. You shouldn’t have these issues with alternative bad credit equipment funding.

3. Tailored Loans

Often, with financing, it can feel as though we’re forced into signing an agreement even though the loan doesn’t suit our needs fully. With alternative funding, it’s time to get the loan and repayment options that suit YOU. Rather than one-size-fits-all solutions, there’s flexibility. Not every business needs huge amounts, some just need a new fridge or a piece of machinery. Thankfully, business funders in this field recognize the need for tailored loans and terms.

4. Trusted Providers

Normally, you’ll have the option to purchase equipment from your chosen vendor. Our skill is helping others with commercial funding, we don’t pretend to know what’s best for your business. Therefore, we’ll support your decisions and help with the financial aspect of the transaction. You know what equipment you need, and you know the best place to get it too.

5. Low Risk and No Upfront Fees

Sadly, there are two huge problems with other sources of finance:

• Lots of upfront fees
• Collateral

When services charge extensive upfront fees, you’re still affecting the cash flow of the business even though you aren’t purchasing the equipment up front. With collateral, it presents a threat to your business should something go wrong with the loan. With bad credit equipment financing, the idea is to have the actual equipment as collateral. With this, you don’t need to risk other business assets (or even personal assets!).

 

Equipment Financing and Collateral

We touched on it in the previous section, but it’s worth digging deeper into the topic of collateral because it’s something that can cause confusion. Essentially, collateral is an asset that the lender can take possession of if you fail to repay the loan; this asset covers the cost of the loan and means that the borrower is a lower risk. If a service lends to an individual without collateral, they have no protection if you suddenly stop paying.

With traditional loans, collateral could include company vehicles, business assets, real estate, or even stock. In some cases, it includes personal assets including the family home and vehicles. With an alternative equipment loan, the good news is that your personal assets remain safe. Instead of using personal assets, the lender considers the equipment itself as collateral. If you fail to pay, they will take the equipment away. Let’s say you use the money to buy a delivery van for your baking company; failing to pay the loan will result in the lender collecting the van and selling it to recover costs.

Saving Your Credit Score

In this guide, we’ve focused on people with bad credit who want to purchase equipment for a business. However, it’s fair to say that some people look for these types of loans because they fear having their credit pulled. Whenever a hard inquiry is made on your account, this can impact your credit score. The more inquiries you receive, the bigger this impact. There are two things to note when it comes to credit pulls:

• Not all hard inquiries affect credit score (it all depends on your borrowing history)
• Some lenders will perform a soft credit pull and this doesn’t affect the credit score at all

If you’re simply trying to protect your credit score, you don’t necessarily need bad credit equipment funding. Instead, talk to your lender and discuss credit pull options that protect your score.

On the other hand, those with a poor credit score now have options and we urge you to contact South Florida Funding Group for all your commercial funding needs!