Equipment financing with a 500 credit score
Equipment finance underwrites the equipment as well as the owner, which is why a 500 FICO is a starting point here rather than a wall.
The short version
Equipment finance programs in the network generally begin around a 500 FICO, including for start-ups. The reason a bank says no and an equipment lessor says yes is collateral: the equipment secures the transaction and has a resale value, so the owner’s score is one input among several rather than the whole decision. Expect higher pricing, a larger down payment, or both.
Realistic expectations
What a 500 FICO typically means on an equipment deal
Pricing and structure move with the equipment type as much as with the credit profile. Titled, liquid, easily remarketed equipment prices best.
| Profile | Usually in reach | Structure | What moves the price |
|---|---|---|---|
| 500–550, 2+ years trading | Equipment finance and lease | $1 buyout or FMV | Equipment resale value, bank statements |
| 500–550, under 2 years | Smaller tickets; larger down payment likely | $1 buyout | Time in business, down payment size |
| 500–550, start-up | Case by case; owner experience matters | $1 buyout, shorter term | Industry experience, down payment |
| Under 500 | Possible on strong collateral or with a guarantor | Varies | Collateral quality, additional guarantee |
| Any profile, used equipment | Supported | Varies | Age, hours and make of the machine |
Ranges reflect published program terms. Approval, approval amount and terms are determined by the provider after underwriting and are not guaranteed.
Why collateral changes things
Why equipment finance is different from a business loan
An unsecured business loan has nothing to fall back on but you. An equipment transaction has a machine with a market.
The equipment is the security
A lessor that can remarket a machine carries less exposure than a lender advancing cash. That is the entire reason a sub-550 file is workable here.
Some equipment prices better
Titled vehicles, trailers, excavators and machine tools have deep secondary markets. Highly bespoke or rapidly depreciating equipment does not, and prices accordingly.
New and used both qualify
Used equipment is financed routinely. Age, hours and make affect the advance rate rather than ruling it out.
What strengthens the file
Four things that move a borderline deal
A meaningful down payment
The fastest way to get a challenged file approved. It reduces the amount at risk and signals commitment.
Clean recent bank statements
Three to six months showing consistent deposits and few negative days often carries more weight than the score itself.
A quote for specific equipment
A real invoice for an identified machine is underwritable. “About $60,000 for some equipment” is not.
Industry experience
For a start-up, years of experience operating the same equipment for someone else substitutes for trading history.
Structures
$1 buyout versus fair market value
$1 buyout
Higher monthly payment, and you own the equipment outright at the end for a nominal sum. Suits equipment you intend to keep and run for years.
Fair market value
Lower monthly payment with a purchase payment due at the end. Suits equipment you may want to upgrade, where obsolescence is a real risk.
Run both before you choose
The equipment calculator compares the two structures on the same machine. The cheaper monthly payment is not always the cheaper deal. Talk to your accountant about Section 179 and depreciation treatment before you decide.
Questions
Common questions
What is the minimum credit score for equipment financing?
Programs in the network generally begin around a 500 FICO. Below that, approval depends more heavily on the collateral, a larger down payment or an additional guarantee.
Can a start-up with bad credit get equipment finance?
It is considered. With no trading history, the owner’s industry experience, the quality of the equipment and the size of the down payment do most of the work.
Will it be expensive?
More expensive than a bank facility, yes. How much more depends as much on the equipment as on the score — easily remarketed machines price considerably better.
Do I need a personal guarantee?
Usually, on a challenged file. The owner’s personal credit may be reviewed as part of that, which is why the personal score matters even on a business transaction.
Can I finance used equipment?
Yes. Used equipment is financed routinely. Age, hours and make affect the advance rate and the term rather than disqualifying the deal.
How fast is a decision?
Instant up to $15,000 in many categories. Larger transactions are handled by an account representative and depend on bank statements and equipment documentation.
Keep reading
Related pages
See what you qualify for
One application, the whole lender network. Looking starts with a soft credit check and will not affect your score.