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No Credit Check Equipment Financing: Does it Exist?
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No credit check equipment financing is virtually impossible — but even if you have poor credit, there are still ways for you to get the funding you need for your business. Read on to learn about how you can get equipment financing with bad credit.
Why equipment financing requires a credit check
Equipment financing requires a credit check because the equipment acts as collateral or a guarantee for the loan — in other words, equipment financing is secured by the equipment itself. If you default on your loan, the equipment could be seized as payment.
Since the equipment is the guarantee for the loan, a credit check helps the lender evaluate your borrowing history and determine if you’re at risk of defaulting on loan payments. However, because equipment financing is secured by the collateral, this means that the lender weighs your credit less than if you were applying for an unsecured loan.
How to get equipment financing with bad credit
Because collateral is required to guarantee the loan, this may mean that lenders are more willing to work with you if you’re looking for equipment financing with bad credit. With the equipment as additional security against default, a borrower’s credit becomes less important to lenders.
As a result, some lenders are open to extending equipment financing to borrowers with credit scores as low as 575. If your credit is poor, some secured loan lenders may place a blanket lien on the loan, which means that your entire business assets act as collateral.
When applying for an equipment loan, you may need to provide the following:
- Time in business
- Annual revenue
- Personal information (name, phone number, email address, SSN)
- Business information (name, type of business, industry, business address, Tax ID)
- Business plan
- Recent bank statements
- Business and personal tax returns
If you are concerned about your credit score impacting your ability to get equipment financing, there are additional steps you can take to improve your chances of approval:
- Make a larger down payment: The standard down payment for equipment financing is 10% to 20% — however, if you make a larger down payment, like 30% or 40%, you might increase your chances of approval.
- Leverage existing bank relationships: Instead of looking into new banks, leverage the banks where you already have accounts. These lenders might be more approachable since they know your history and already have a customer relationship. Your existing bank might also have loyalty perks for continuing to use their products for your business.
- Apply with a cosigner: A cosigner could help you get approved for your loan, as they would add a level of security. However, your cosigner would then be on the hook for payments if you miss payments.
- Offer additional collateral: While equipment loans use the equipment as collateral, you can also offer more collateral beyond the equipment. More collateral adds more security to the loan.
- Update your business plan: Providing a business plan is typically part of the loan application already. However, by strengthening your business plan, you can become a more attractive candidate to lenders.
Five options for equipment financing
When shopping for equipment financing for bad credit, here’s several options of lenders open to borrowers with credit scores below 700. The equipment financing companies on our list were chosen based on the following criteria:
- Minimum FICO Score requirement below 700.
- Funds available within one week of approval.
- Flexible repayment terms with no prepayment penalties.
|Best Equipment Financing Companies|
|Company||Interest Rate||Fees/Penalties||Loan Amounts||Min. FICO Score||Time to Funding After Approval|
|National Funding||Not listed||Origination fee; no prepayment penalties||Up to $150,000||650||1 business day|
|Commercial Fleet Financing||Not listed||No hidden fees||From $10,000||640||As little as 1 business day|
|Funding Circle||11.29% to 30.12%||Origination fee between 4.49% and 8.49%; no prepayment penalties||$25,000 to $500,000||660||5 business days|
|Crest Capital||Starting at 4.49%||$275 admin fee; no prepayment penalties||$5,000 to $500,000||650||Varies|
|CIT||Starting at 5.49%||No prepayment penalties||Up to $500,000||620||1 business day|
Alternatives to equipment financing
If you’re still concerned about finding equipment financing for bad credit, here’s a few other financing options to consider. Keep in mind that getting loans without credit is virtually impossible because lenders want to know how risky of a borrower you may be.
Unlike an equipment loan, an equipment lease would require you to return the equipment at the end of the term. An equipment lease may offer a lower upfront cost and monthly payment compared to equipment loans, but your credit would still play an important role in securing an equipment lease.
Short-term business loan
Short-term business loans provide you with quick access to funds, with terms ranging from three to 18 months, with daily or weekly repayments. Because the application criteria may be more lenient, you might be better able to get this type of loan with bad credit. However, short term loans may not be enough to cover the purchase of equipment.
Merchant cash advance
A merchant cash advance is a lump sum upfront in exchange for a portion of future sales. Your credit plays a lesser role with a merchant cash advance, since the lender would be more interested in your cash flow than your payment history. However, be prepared for high interest rates.
Invoice factoring or accounts receivable financing
Like a merchant cash advance, invoice factoring or accounts receivable financing relies on your businesses’ unpaid invoices for repayment. Credit plays a less important role because lenders will look at your businesses’ unpaid invoices to determine eligibility.
You can also use a personal loan to address your business needs. While a personal loan will still factor in your credit score, the main advantage is that it won’t impact your business credit score and it may not require collateral. However, the interest rate is typically higher, and the amount you borrow will usually be lower than with an equipment loan.
No credit check equipment financing FAQs
Can you get equipment financing with bad credit?
Equipment financing for bad credit may be possible. Several lenders that provide equipment financing for credit scores under 700. In addition, you can still take steps to get approved with a lower credit score, such as having a cosigner or a larger down payment.
What is no credit check equipment financing?
No credit check equipment financing is when a lender does not look at your credit history as part of your loan application. Credit checks are required for equipment financing, as lenders need to check your financial history to feel secure about your ability to make payment.
What is the minimum credit score needed for equipment financing?
Some equipment financing companies may approve a credit score as low as 575. Credit history is just one piece of the lender’s decision-making process. Other factors include the size of your down payment, your company’s annual revenue and any additional collateral you can offer for more security.
Can startups qualify for equipment financing?
Yes, equipment financing for startups may be available for businesses with strong credit, a solid business plan and the ability to make a sizable down payment.
What is the difference between equipment financing and equipment leasing?
Equipment financing is a loan that allows you to purchase the equipment over a set period of time, with interest. Equipment leasing enables you to use the equipment for a specific term, though at the end of the lease term, you may have the option to purchase the equipment. Several key differences include the equipment loans usually require a down payment and allow you to deduct depreciation on your taxes.