5 Credit Items Equipment Leasing Firms Look At

With the economy slowly making its way back to the good ‘ol days and lending institutions “thawing out” and beginning to release capital small businesses  throughout the country are considering an equipment purchase, but are reluctant to spend the cash.  Equipment leasing provides small businesses with no money down, extended term programs, tax benefits, and customized payback options.  With rates at historic lows you shouldn’t use your own cash to secure a great deal on a piece of equipment.

There are five main credit items when an equipment leasing company is looking at when considering your deal:

Character- While somewhat subjective, your character plays a big part in securing an approval from an equipment leasing company.  How do you treat your staff?  How’s your business acumen? What will your references say about you? How’s your personal credit?

Conditions- This one’s sorta obvious.  Equipment leasing companies will look at current macroeconomic conditions and how the industry you’re involved in fits into what is going on.  They’ll be interested in the use of funds and what you’re planning on buying with it.  Which brings us to the next “C.”

Collateral- What is it that the equipment leasing company is funding?  Sometimes you’ll have a better chance of getting approved if the equipment is a truck, heavy construction equipment, or machine tool instead of a piece of hardware or software.  Of course, if you’re not in need of the big, heavy pieces then make sure you’re strong in the other

Capital- In certain instances, equipment leasing companies want to know how much the owners have already invested into the business and how long they’ve been a part of business.  How well capitalized is the business?  This shows them you’ve put risk into the business and makes them more comfortable to do the same.

Capacity- Probably the most important facet an equipment leasing lender will look at is the company’s ability to repay debt.  They’ll look at things like your D&B and Experian Business Credit report to determine the company’s performance of past borrowing.  Certain deals may require the company’s historical financials to meet certain ratios such as debt service coverage.

We hope this posts assists you in locking in your approval with the equipment leasing vendor of your choice.  Make sure to check out our post on “How to Choose an Equipment Leasing Company” or if you want to see if you can get approved today please click here.


Bill Miller