Are you looking to get new or used equipment or vehicles for your business? If so, consider truck and equipment financing. It helps preserve your cash flow, provides you with the most up-to-date equipment, and comes with tax benefits. All you have to do is determine how to qualify, and it may be easier than you think. Lenders consider several factors when deciding whether to lend business owners’ money. So, you may still be eligible for a loan, even with credit or business challenges.

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What Lenders Look For

The bottom line is that lenders need assurance that you will repay them if they provide you with equipment financing. As a borrower, it’s your qualifications that give that assurance. But it’s not all based on your credit history. That’s only one factor. You may also qualify based on any collateral you have, including the equipment itself and even your business plans. These not only determine whether you are eligible for the financing, but at what rates too.

Here are four things lenders look at to determine whether you qualify for truck and equipment financing:

1. Credit History

Credit is usually what we think of when we think about what potential lenders look at to determine financing eligibility. We know that our credit score determines if we qualify for credit cards and home or auto loans. Similarly, in business, your business credit history can be a factor in the decision to extend credit to you. The rule of thumb is the better your credit history, the better your ability to get financing and better rates. Also, as a small business, you might need to show both your personal credit history and your business credit history.

2. Cash Flow

Cash flow is not the same as the cash you have on hand in the bank. Instead, cash flow looks at how your business uses its money – specifically, what comes in and where it goes. Positive cash flow shows that you can pay your business expenses. But you can also reinvest in your business, plan for future financial challenges, and repay your debts. Whereas negative cash flow shows you may be at risk of defaulting on loans and other obligations. Since lenders want to be repaid, cash flow is something they look at when determining whether you qualify for financing.

3. Collateral

In poor credit history or if you are facing business challenges, you can still get financing with collateral. For equipment financing, the collateral is the actual equipment itself. You get your financing by pledging the equipment as collateral to the lender. Then, if you cannot repay the lender, they can seize the equipment from you. Therefore, collateral considerations help you qualify for equipment financing, even if your credit or cash flow is not optimal.

4. Story-Based

Story-based consideration may be one of the least known qualifications for financing. It looks at the overall picture of your business rather than a set of rules around credit or cash flows. For example, a truck and equipment financing company says, “Lenders know that businesses need to reinvest in order to grow. Equipment purchases help a business grow and therefore generate even more revenue. So, lenders will consider a strong business case in their decision to extend credit.”

Do’s and Don’ts of truck financing

Find the Truck and Equipment Financing Option That’s Right for You

From collateral for credit history, it’s good to know there are several ways you can qualify for truck and equipment financing. However, the exact qualifications can vary from lender to lender and by equipment type. So, it is best to speak to a lender directly about your specific needs and qualifications.