Five Tips for Obtaining Equipment Financing

Obtaining equipment financing is pretty easy when you have time in the business and perfect credit. However, it’s a lot harder when you’re just getting started or have less than perfect credit. The following five tips will help improve your chances of getting your machine tool loan approved.

1. Documentation

Provide documentation for any derogatory information in your credit history. For example, if you have a judgment or tax lien in your history that you’ve since satisfied, make sure you submit documentation supporting your claim with your application. Another common issue is an account you’ve paid off that’s still showing as open on your credit history. This approach not only addresses the specific issues preventing you from getting a loan, it also shows the underwriter you’re not trying to hide anything.

2. Credit Rating

You’ll need to present compensation factors for any weaknesses in your history. For example, you may need to offer a larger down payment to offset a recent repossession or bankruptcy. If you have other slow-depreciating hard assets, you could offer them as additional security. This option is becoming an increasingly popular method of growing certain industrial businesses with poor credit.

3. Previous Financing

Use your previous lender as a reference if you’ve already financed equipment and had a good payment history. You can also use other types of financing from your business, including repair or machine financing. However, payment history on a private vehicle is unlikely to help you with a commercial loan.

4. Cash Flow

If your business is doing well, be sure to get that information in front of your lender. Bank account statements showing net monthly income that’s at least twice the equipment payment will give lenders confidence that you’ll be able to make the payments. Strong cash flow is especially persuasive for lenders that require you to make payments via ACH.

5. References

Lenders also like to see that you already have work lined up before they approve a loan. PO’s with delivery dates in the future make excellent references and contracts show that you can start earning income as soon as you get the equipment.


Getting the financing you need for your next equipment requires an open conversation with your prospective lender, especially if you have poor credit. Many business owners have some credit issues, so lenders are used to looking for additional factors to strengthen an application that initially appears weak.