Is it possible to finance equipment with bad credit?

The short answer is yes, but there are some considerations to keep in mind to finance equipment with bad credit. Past credit report issues can make it difficult to secure traditional financing. However, if you have existing equipment or other assets, equipment sale-leasebacks and asset-based lending options might be your solution. If you or your business fits this criteria, complete an equipment and asset list to learn more about your asset-based lending options.

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How Does Asset-Based Lending Work?

Asset-based lending is a type of lending that is secured by collateral. The collateral can technically be any type of asset, such as real estate, inventory, accounts receivable, or equipment. In an equipment sale leaseback, the deal is typically structured as a lease. The borrower makes monthly payments for the duration of the lease.

Asset-based lending is often used by businesses that have difficulty obtaining traditional financing due to bad credit or other guidelines that traditional banks redline. The collateral provides security for the lender and allows the borrower to obtain financing on more favorable terms.

Using Existing Equipment to Finance Additional Equipment

One of the easiest ways to finance equipment with bad credit is to leverage your existing equipment to structure the deal.

For example, if you own construction equipment, below is a small list of types of equipment that could be used for an asset-based financing agreement, using the existing equipment as collateral. You can get a valuation of your current assets to see what you qualify for.

Finance Equipment with Brad Credit using Collateral
Use Assets and Not Credit with Asset Based Lending

Use Other Assets to Finance Equipment

In addition to your business equipment, a lender could also use others’ assets as collateral to structure a new equipment finance agreement.

Examples of Business Assets

Here are some examples of business assets that underwriters will consider:

Commercial real estate

Commercial real estate can be used as collateral to secure your financing as collateral for your equipment finance deal.

Industrial equipment

The lender will then review the equipment and determine the lendable value of the assets. If you are approved, the agreement will be made based on the value, and you will be able to continue to use the industrial equipment.


Leverage the existing value of your inventory to purchase your equipment. Depending on the inventory, a valuation would be made to assess the available collateral. You can submit your inventory list to receive a valuation.

Accounts receivable

If you have a large amount of accounts receivable with valid vendors, that can be used as collateral to secure equipment financing as well.

Motor vehicles

Receive a valuation on your existing fleet of vehicles to use as collateral for additional equipment.

Bonds, Stocks, & Insurance policies

Pledge other financial assets as security for the transaction like stocks, bonds, and insurance policies.

What are the traditional options for financing equipment with bad credit?

There are a few options for financing equipment with bad credit without using collateral. One option is to work with a lender that specializes in bad credit loans. These lenders will usually have higher interest rates and may require collateral, but they can be a good option if you have a limited credit history or a low credit score.

Another option is to get a co-signer for your lease or loan. This is someone with good credit who agrees to sign the loan with you and is responsible for making payments if you default. This can be a family member, friend, or business partner. Having a co-signer can help you get a lower interest rate and may make it easier to qualify for a loan.

Finally, you can consider leasing equipment instead of buying it. Generally, lease agreements are much more credit-friendly than traditional loans. This can be a good option if you don’t have the cash for a down payment or you’re worried about making payments on time. With a lease, you make payments to use the equipment, and at the end of the lease, you may have the option to buy the equipment.

How do traditional banks analyze bad credit history?

There are a few key things that banks look at when considering bad credit. The first is your payment history. Do you have a history of making late payments or missing payments altogether? If so, that’s a big red flag for banks. They want to see that you’re able to make timely, regular payments.

Another factor banks look at is your credit utilization ratio. This is the amount of your available credit that you’re using. If you’re maxing out your credit cards or using a high percentage of your available credit, that’s also a red flag. Banks want to see that you’re using your credit responsibly and not putting yourself in a financial hole.

Finally, banks will also look at your credit score. This is a numerical representation of your creditworthiness. The higher your score, the better. A low credit score is a sign that you’re a higher-risk borrower, which is not something banks are looking for.

The average credit score in the United States is 698, based on VantageScore® data from February 2021

Equifax, February 2021

Huge Benefit of Asset-Based Lending

With asset-based lending not offered by traditional banks, credit scores are rarely a factor and decisions are made based on the value of your existing equipment and assets, and not your past credit history.


Banks typically consider three factors when determining whether or not to approve a loan: payment history, credit utilization, and credit score. However, with asset-based lending, credit scores are often not a factor. Instead, decisions are made based on the value of your existing equipment and assets. This makes it a great option for businesses with bad credit.

Have your equipment and asset list reviewed to see what financing options you qualify for.