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How to Finance an Equipment Rental Business with Poor Credit

As the owner of an equipment rental business, it takes considerable amounts of money to maintain the equipment and the business property, and this feels impossible if your business credit score doesn’t meet at least 650 or is even below 500. Your situation may even be that you have no business credit or have just suffered a bankruptcy or tax lien.

Being in these situations would make anyone wonder how they could ever receive financing, but in this article, we’ll go over precisely that so that you can have hope in your business again.

Determine if You Need Equipment Financing or Equipment Leasing

The first thing you should do before looking for funding or financing is to determine what the needs of your equipment rental business are. This will help you determine if your business requires financing or leasing.

If your business needs “hard equipment,” you will be happy to know that you will more likely be accepted. Hard equipment falls under the category of “hard costs,” in construction spending that relates to costs pertaining to the physical construction of various projects. Examples of hard equipment would include trucks, raw construction materials, and more importantly, heavy machinery.

Equipment financing will allow you to keep up your monetary reserves while also providing you with items necessary for your business to run. The most common form of financing is a loan, where you first make a down payment on the equipment you need and then borrow the rest of the money. Loans are always compounded with interest while you pay off the initial borrowed amount and the interest in an agreed-upon time limit.

If you successfully pay off the debt on the equipment by the end of the term, the equipment is yours, but if you don’t business lenders will often consider your equipment as collateral and take them. Other lenders will ask for some kind of personal guarantee before lending you money. This traditional form of financing, however, commonly requires decent or good credit.

Equipment leasing, on the other hand, is much friendlier for those who have poor credit because leasing equipment doesn’t require a down payment and the lessor has the reassurance that they still own the equipment until you pay for it at the end of the lease term. This option is perfect if replacement or new equipment is necessary for the continuation of your business.

Seek Out Alternative Financing Options

If you have determined that you don’t want either a loan or a lease for your business, you must look at alternative funding. Alternate equipment loan lenders often have less stringent credit requirements than banks.

When you approach private sources for funding, there will be measures they take to offset their risk in lending you money. You can ease a private investor’s fears by

  • Having a cosigner
  • Making a competitively large down payment
  • Offering significant collateral

If what you need is money to cover hard costs, specialty lenders will commonly receive the request considering any credit, even with low down payments, because hard equipment is not a risky investment. They keep their value very well.

On the other hand, risky costs, as with soft costs, are not normally financed because they immediately lose their value to almost zero once it becomes repossessed, which is useless to investors. With these, you can expect to pay higher amounts if your request is accepted. Examples of soft costs are anything worth less than $10,000 and planning expenses. Since it is equipment for which you need financing, this won’t be a concern for you.

Now, what are the alternative finance options available to you and your business?

  • Crowdfunding
  • Peer-to-peer lending
  • Asset-based lending
  • Inventory financing
  • Working capital loans

Educate Yourself Before You Sign

Whichever option you choose, it is essential for you to know with absolute certainty the terms and conditions attached you the loan before you make any agreement because the terms change with each lender.

Conduct research to understand how taking a loan, a lease, or (), will affect your rental business in the near future in its finances.

It’s a wise practice to project pretend loans based on your research and to figure out how you would pay them. This allows you as the owner to consider potential obstacles, project the minimum income the business needs to make per month, and give you time to collect statements in your business finances that detail cash flow coming in, and create projections of its financial standing in the future.

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Understand the Factors of Your Business’s Credit Score

Before and after receiving your financial support, it is imperative that you increase the reputation of your business with good spending habits, much like with personal credit, and to strengthen it with good revenue and profits. Your business’s score relies entirely on the reputation of how financially responsible it is, which you are perfectly aware of.

If you have a Pandex score between 80 and 100 you are considered low risk, while a score between 50 and 79 is medium risk, but there is still hope of receiving financing. FICO SSBS is another common business credit scoring service for small businesses, and is what is used when underwriting SBA-guaranteed loans, or Small Business Administration guaranteed loans.

These two and other scoring services fluctuate in score value when they consider certain criteria for your business. These criteria are:

  • How much of your available credit the business uses
  • How often bills were paid late
  • The frequency of debts that were sent to collectors
  • The existing debts your business has, or the lines of credit in your operation’s name
  • Public records containing information of problematic legal proceedings such as bankruptcies, liens, or UCC filings.
  • The size of your company
  • The risks related to the construction industry (in your case)
  • And finally, the frequency you have been previously applying for loans or new credit lines

Keep all of these things at the forefront of your business plans as you begin to look for financial aid either from traditional resources or private investors. Determine areas that can be improved even by a little bit, and you will begin to improve your chances of being accepted.

Improve Your Business’s Credit Score

Then, you can improve your credit score further, by actively getting your responsibility with money noticed and, if you need to finance a new equipment rental business, establish the business as an entity of its own. While loans and credit are usually automatically reported, business lenders and private investors might not report all data or only report data to a subset of a major credit bureau. In these cases, you should open a business credit card and choose your lenders according to who sends full reports directly to the credit agencies.

As for establishing a new business, small equipment rental businesses and sole proprietorships will often use the owner’s personal credit history because it’s easier. However, there needs to be established boundaries between you personally and your business so that the business credit grows. To do this, use your business’s federal Employer Identification Number (EIN) instead of your personal SSN.

If you can accomplish this before applying for financial aid, many private investors and even the bank will see promise in your equipment rental business and will be more willing to risk loaning you the money your business needs in spite of your credit challenges.


It isn’t impossible to get the financing you need, no matter what your circumstances are. If you are organized and confident in the potential and capabilities of your business and can back the confidence with proof, it will help you tremendously. One more thing: you don’t need to look for financing for new equipment.



The business funding you need when others say No!.

2569 Bay Pointe Dr.
Weston FL 33327




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