Guide
How to qualify for equipment financing with under two years in business
Businesses under two years old can often still qualify for equipment financing because the equipment itself acts as collateral. Providers typically weigh the owner’s personal credit, a down payment, the value and resale market of the equipment, and any industry experience. Expect a larger down payment or a higher rate than an established business would be offered.
By Truidian · Updated
Why newer businesses can still qualify
In equipment financing the asset secures the financing. If the business cannot pay, the provider can recover the equipment, so underwriting relies less on a long operating history than a bank loan would. Equipment that holds its value, such as trucks, commercial vehicles and standard machinery, is generally easier to finance than specialized or custom equipment.
What providers usually weigh
Each provider sets its own criteria, but these factors come up repeatedly.
- Personal credit score of the owner or guarantor
- Down payment, commonly 10% to 20% for newer businesses
- Type, age and resale value of the equipment
- Prior experience in the industry, even if the current business is new
- Bank statements or evidence of current revenue
- Whether the equipment will generate revenue directly
Ways to strengthen an application
Offering a larger down payment, choosing equipment with a strong used market, and providing a clear contract or customer pipeline for how the equipment will earn money all reduce the provider’s risk. Starting with a smaller, less specialized purchase can also build a payment history that helps with the next financing.
Compare structures too. A lease, a lease-to-own arrangement and a traditional equipment loan can have different down payments, ownership rules and tax treatment. Ask your tax advisor how each would be treated for your business.
FAQ
Common questions.
Can a startup get equipment financing with no down payment?
Sometimes, particularly with strong personal credit and equipment that holds its value, but a down payment is more common for businesses under two years old. A larger down payment generally improves approval odds and terms.
Does personal credit matter for equipment financing?
Yes, for newer businesses it usually matters a lot because the business has little credit history of its own. Providers commonly review the owner’s personal credit and may require a personal guarantee.
Is equipment leasing easier to qualify for than a loan?
It can be, since the provider keeps ownership of the equipment during the lease, but terms vary. Compare total cost, end-of-term options and who is responsible for maintenance before choosing.
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Truidian is a business solutions company, not a lender, factoring company or payment processor. Services are offered by participating third-party providers and are subject to their approval and terms. Figures shown are general ranges, not offers or quotes. This content is general information, not legal, tax, accounting or financial advice.