As a business owner, partner or equipment vendor, you try to find goodways to finance your business or help your clients finance your products. With this goal in mind, you have to consider business equipment lease financing. When compared to business loans, applying for equipment lease financing is generally easier, the application process faster and the requirements less stringent than commercial loans.
What do you need to get approved for an equipment lease or finance? Many financing companies require the submission of the following documents: financial statements, tax returns, personal financial statements and a vendor proposal. Credit history is another major factor to get a lease. Of course, if you can show good or excellent credit, a lender will be more confident in your ability to make your monthly payments.
Nevertheless, if you have a history of not-great credit, it is possibleto get the equipment financing you need. Let’s talk about the steps you can follow to acquire a lease despite having bad credit.
Finance Programs for Weak Credit
It is a relief to know that there are business equipment financing companies that extend special lease programs for businesses that are credit challenged. As a matter of fact, getting an equipment finance can be just the thing you need to be able to improve your bad credit and raise your score consistently over the months you are making your payments.
If you plan to apply for a lease, be sure to check your credit report and review if the problems are in the past and there are no pending judgments which you need to take care of first. See to it that you do not have past due debts in any of your accounts and that you are in good terms with your present creditors. For those who have a bankruptcy, your application may get automatically rejected if you have been discharged recently or for less than 2 years.
To increase your chance of getting approved, include a detailed letter of explanation along with your credit application. In your letter, be sure to include the steps that you have already done to improve your credit and to avoid going downthe wrong path again. Underwriting will appreciate that you made the effort to explain your past circumstances and how things will improve. A potential lender is most interested to learn that you have the capability to make your monthly lease payments throughout the term.
Advice Before Applying for A Lease
Prior to submitting a finance application to your chosen leasing company, make sure that the lender accepts applicants who have bad credit history. Many leasing companies strictly require good credit and submitting your application to the wrong lessor will only result in rejection. There are a category of lenders which specifically service the bad credit market just as there are lenders for the start-up business market. Bottom line – know who you are submitting your paperwork to.
Secondly, each time you submit a lease application, an inquiry will be made to your credit report. Too many inquiries may cause you to drop a few points from your credit score which could be a problem if you have a low score. Add to this issue, a potential lessor may decide to reject your business if it finds too many inquiries from other leasing companies in your credit file. If you do get rejected a couple of times, other leasing companies will have doubts about your credibility. Best advice is to pull your credit score yourself once and submit a copy with your application or have a finance company pull it once and then instruct others not to do it again until funding.
Poor credit doesn’t mean you can’t get financed; it just takes a little more work and you have to deal with lenders who service your category. Your goal is to make your payments consistently to build up your ranking again and you won’t have to deal with these types of issues again.