A Complete Guide to Getting Equipment Financing with Bad Credit

For business owners with bad credit and seeking to upgrade equipment or get out of  the endless renting cycle there is a better option. Equipment financing is a great option to secure equipment at long term affordable fixed monthly payments even with bad credit. Most tangible assets can be financed under equipment loans but generally lenders will finance assets that have a large demand and big enough market such as light or heavy construction equipment, commercial trailers, commercial vehicles, restaurant equipment and much more.

An equipment loan can be beneficial for many reasons. First of all, it is essential for ongoing and smooth business in a growing operation and secondly improve profitability as rentals can be expensive and some assets can have equity appreciation. AMP Advance offers equipment loan options for businesses and assist business owners in upgrading their equipment in two ways;

  • An equipment loans
  • An equipment leases

A key difference in an equipment loan or lease generally lies in the tax implication and lifecycle of the asset. Leasing allows you to write off up to 100% of your monthly payments, loans allow you to deduct interest expense and asset depreciation. Equipment leases can be more beneficial to loans in circumstances with the lifecycle of the asset. For instance, if the lifecycle of the asset is short and needs to be replaced often then a lease may suit better since you can return the asset after the lease is completed.

Leasing generally carries lower monthly payments than a loan but might wind up being more expensive in the long run. In part, leases are much expensive as they carry a higher interest rate compared to a loan.

There are two Primary types of leases: finance and operating. The former functions a bit like a loan alternative and is used to finance the equipment you want to own long term. The latter is closer to a rental agreement and, in most cases, you’ll return the equipment to the lessor at the end of the lease. Both types have a large number of variations. Here are a few common types you’ll come across:

Fair Market Value (FMV) Lease: With a fair market value (FVM) lease, regular payments can be made while borrowing equipment for a specific term. At the maturity of term, you have two options either you can return the equipment or purchase it at its FMV (fair market value).

$1 Buyout Lease: A type of capital lease where you’ll pay off the cost of the equipment, plus interest, over the course of the lease. In the end, you’ll owe exactly $1. Once you pay this residual, which is little more than a formality, you’ll fully own the equipment. Aside from technical differences, this type of lease is very similar to a loan in terms of structure and cost.

10% Option Lease: This lease is the same as a $1 lease, but at the end of the term, you have the option of purchasing the equipment for 10% of its costs. These leases used to carry smaller monthly payments than a $1 buyout lease.

Advantages of Equipment Financing

Whether you have a large-scale business or a small mom and pop business, an equipment loan can help you build your company’s revenues faster than ever. Your likelihood of success will also significantly increase when you grow your equipment base of your business.

  • Availability of leaseback options (owned asset is free & clear)
  • Tax write-off incentives
  • Availability of different lease options
  • Increase in business’s revenue because of upgraded equipment
  • Builds and increase the assets of the business
  • Increase in business’s profitability

Facts and Requirements

Equipment loan rates are determined using several different factors. No two businesses are exactly alike, so we use your credit profile, revenue, down payment, and equipment purchase value to help us assess your company and determine your loan rate. At AMP Advance, we offer rates as low as 7.99% APR on one to ten year repayment plans. While you are paying for your asset, there are also returns on your investment when you use equipment financing options.

We want to make sure that getting your loan is as swift and painless as possible. To get your loan approved more quickly, we recommend having the following information readily available: tax returns, business checking account with most recent 4 months of statements and a dealer invoice / quote of the equipment you will be purchasing.

Who Can Apply?

Many different types of businesses apply for equipment loans. Whether you’re a startup company in need of a 3D printer or an established radiology clinic in need of a new MRI, equipment financing is a great option to get the equipment you need without tying up all of your capital. The options of what you can use equipment financing for are virtually endless, you can even use equipment loans for your small business to increase the appeal of your new company’s headquarters to clients. Equipment financing allows businesses–both small and large–to free up cash and get money making equipment quickly. AMP Advance offers small business owners a faster and cost-efficient means to finance any of the business equipment needed to operate your business smoothly and efficiently, and due to having the equipment loan secured by the financed asset, all credit types are welcome.

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