Why equipment is one of the easier things to finance with low credit
A score in the low 600s brings APRs in the upper teens, and strong credit can reach APRs as low as 4% [1]. Most business loans are a bet on you. An equipment loan is partly a bet on the equipment. If you stop paying, the lender has a specific asset it can take back, so it can accept more risk on your credit. NerdWallet's table of minimums by product puts equipment financing at 550+, below lines of credit at 600+ and bank loans at 680 to 700+ [2].
That does not mean no one checks. NerdWallet says equipment lenders run a credit check to judge default risk and to set your rate and terms, and that most require one even when they work with bad credit [1]. It warns that offers promising no credit check can be a red flag for scams or predatory lenders [1].
| Minimum credit score | Minimum time in business | Published rate range |
|---|---|---|
| 550 | 6 months | 9% to 22% |
| 575 | 24 months | 5.99% to 34.99% |
| 600 | 24 months | Factor rates from 1.1 |
| 620 | 24 months | 5.99% to 18% |
Notice the time in business column. Three of the four want two years open. A low score plus a young business is the hardest combination, and it is where leasing and microloans come in.
What your score costs: $50,000 of equipment at each credit level
NerdWallet looked at the rates its listed online equipment lenders give at different scores. Borrowers in the mid to upper 500s see APRs of about 22% to 35%. A score in the low 600s brings APRs in the upper teens. Strong credit, in the high 600s and 700s, can reach APRs as low as 4% [1].
| Credit level | APR | Monthly payment | Total interest |
|---|---|---|---|
| High 600s to 700s | 4% | $920.83 | $5,249.57 |
| Low 600s (upper teens) | 18% | $1,269.67 | $26,180.28 |
| Mid to upper 500s, low end | 22% | $1,380.95 | $32,856.74 |
| Mid to upper 500s, high end | 35% | $1,774.52 | $56,470.92 |
The gap between 22% and 35% on the same machine is about $23,600. Moving from the upper 500s into the low 600s saves more than $6,000 even at the best rate in the lower band. That is why a few months spent on your credit can be worth more than any rate you negotiate.
Fees sit on top. Equipment loans can carry origination fees, and some lenders quote a factor rate instead of an APR, which you should convert before you compare [1].
Five ways to get approved, or approved for less
- Put more down. Equipment lenders may require a down payment of up to 20%, and offering more can raise your approval odds and lower your payment [1]. On $50,000, 20% is $10,000.
- Add collateral. Pledging property or other equipment on top of the machine lowers the lender's risk [1].
- Bring a co-signer with strong credit, who will owe the debt if you cannot pay [1].
- Lead with your finances. Bank statements, tax returns, a profit and loss statement and a balance sheet that show steady cash flow help offset a low score [1].
- Fix your credit reports. Disputing errors and paying down debt before you apply is the cheapest rate cut there is [1].
Match the term to the machine. Equipment loan terms usually follow the equipment's expected useful life [3], so do not stretch a loan on a laptop over five years just to lower the payment.
New business and low score: the hardest case, and how to handle it
Equipment financing is one of the friendlier products for young companies, because the equipment secures it and lenders may accept less time in business and lower credit than other term loans need [3]. But the bad-credit lenders are stricter about age than about score: three of the four on NerdWallet's list want 24 months in business, and one wants 6 months with a 550 score [1].
If you are under a year old with a score in the 500s, plan for these trade-offs:
- Expect to put money down. Some lenders finance 100% of the price for strong borrowers [3], but a weak file usually means a down payment.
- Keep the first purchase small. A smaller first loan paid on time builds the record that gets you a cheaper second one.
- Ask the equipment seller about financing or leasing they arrange. A lease can be easier to get when your credit is thin [1].
- Price an SBA microloan before an advance. A nonprofit microlender may be slower, but it is built for owners with limited credit [1].
Our industry guides cover funding for specific trades, including salons, auto repair shops and medical practices.
If a loan is out of reach: leasing, microloans and other paths
| Option | How it works | Watch for |
|---|---|---|
| Equipment lease | Rent the equipment for a set term; return it, renew or buy it at the end. Some leasing companies work with bad credit [1] | Total lease cost and the buyout price |
| SBA microloan | Up to $50,000 from a nonprofit intermediary, for a term of no more than 6 years [4] | Slower than an online lender |
| Short-term loan | Online loans repaid in 24 months or less [1] | High rates and frequent payments [1] |
| Grant | Free money with no credit minimum, but competitive [1] | Applications take time and are competitive [1] |
| Merchant cash advance | A purchase of future card sales, not a loan; easy to qualify for [1] | One of the most expensive options; estimated APRs can reach 350% [5] |
Microloans deserve a closer look. The SBA's Microloan program lends up to $50,000 through nonprofit intermediaries for working capital, supplies and equipment, with terms of no more than 6 years [4]. NerdWallet notes microlenders often work with borrowers who have bad or no credit and add training and support [1].
For a large, long-lived machine, an SBA 504 loan can cover equipment with a useful remaining life of at least 10 years [6], but it expects stronger credit than the lenders above.
Red flags in bad-credit equipment offers
Walk away, or slow down, if you see these
"No credit check" or promised approval. NerdWallet calls these possible signs of scams or predatory lenders [1].
A factor rate with no APR. Convert it before you compare [1].
A term longer than the equipment will last.
A lease with no stated buyout price, or one you cannot end early.
An upfront fee demanded before you are approved.
A fair bad-credit offer will be expensive, but it will be clear: an APR, a total payback in dollars, a stated down payment and the fees in writing.