If you are searching for equipment loans for bad credit, you are probably concerned about finance rates. Several factors play into the cost of financing equipment. This guide will help you understand how heavy equipment financing rates work.
Factors That Affect Your Equipment Loans for Bad Credit Financing Rates
When you are looking for equipment financing bad credit, your circumstances will play a role in your offered financing rates. Five main factors determine the cost of your heavy equipment financing:
- Equipment Cost
- Whether you borrow money or lease
- Your credit
- Your length of time in business
- The lender you choose
The Impact of Equipment Price on Your Equipment Loans for Bad Credit Financing Rates
When you seek equipment financing bad credit, your lender has to do just as much work to loan you the money to purchase a $10,000 piece of equipment as they do a $100,000 piece of equipment. However, they will make more money over the lifetime of your $100,000 loan. As a result, to incentivize more lucrative contracts, lenders often offer better terms on larger loans. This won’t make a huge difference, but you can expect to save up to 10% on larger loan rates. For this reason, it may be beneficial to combine smaller purchases into one financing package.
The Difference Between Leasing and Buying
When you get equipment loans for bad credit, you own your equipment when you are done paying for it. When you lease equipment, the leasing company retains ownership, though you may have the option to purchase the equipment when the lease is over. The main benefit of leasing is that the payments and upfront costs are usually lower compared to borrowing. Additionally, you may be able to write your lease payments off as an operating expense. However, leased equipment does not add value to your company, and there are more restrictions on how you can use it versus equipment that you own.
The Impact Your Credit Has on Your Equipment Loans for Bad Credit Financing Rates
Whether you seek start-up business loans with bad credit or equipment financing bad credit, your credit will play a role in the rates you are offered. The worse your credit is, the riskier it is for lenders to loan you money. To compensate for this increased risk, borrowers with bad credit usually have to pay higher financing rates. If your credit score is under 600, you can probably expect to pay higher rates on your equipment financing.
The Impact Your Length of Time in Business Has on Your Equipment Loans for Bad Credit Financing Rates
In addition to your credit, the length of time you have been in business affects the level of risk lenders perceive when considering your financing application. New businesses may pay a substantially higher rate for equipment financing than companies operating for two years or longer. This is because many new businesses fail, and a failed business is unlikely to repay its debts.
The Impact Your Lender Has on Your Equipment Loans for Bad Credit Financing Rates
There are several options for equipment loans for bad credit. To get the best deal, it is a good idea to shop around. If you are purchasing new equipment, the dealer is a good place to start. Buyers with good credit may get a better deal at the dealer than anywhere else. However, financing with the dealer may not be the best equipment financing bad credit option. Because dealers usually don’t make much money on financing, they usually won’t finance high-risk borrowers.
If you don’t qualify for dealer financing or aren’t offering you a good deal, consider other financing sources, such as First Capital Business Finance. We offer several financing options, including equipment loans for bad credit.
Multiple factors, including your circumstances and equipment needs, determine your overall cost of equipment financing. The First Capital Business Finance team can help you find the right financing options for your credit situation and equipment needs. We offer heavy equipment financing for all credit scores. Call us at 888-510-3573 or contact us online to discuss the financing option that is best for you.
Understanding Heavy Equipment Finance Rates | First Capital Business Finance