6 Ways Your FICO Score Can Affect Equipment Financing

How does a FICO score affect equipment financing in business?


To help you best apply your FICO score to finance equipment for your business, we asked CFOs and business owners this question for their best insights. From unacceptable FICO scores being a roadblock for startups to how low FICO scores can disrupt financing agreements, there are several insights about FICO scores that may help inform your decision regarding equipment financing for your business.



Here are six ways FICO score affects equipment financing in business:

  • Unacceptable FICO Score Can Be a Roadblock for Startups
  • Low FICO Score Requires Larger Down Payment Or Collateral
  • FICO Credits Go Beyond Just Getting a Loan
  • Good FICO Score Helps You Build a Financial Foundation 
  • FICO Scores Help Lenders Determine Your Risk To Them
  • Low FICO Scores Can Disrupt Financing Agreements

 

6 Ways Your FICO Score Can Affect Equipment Financing

 

Unacceptable FICO Score Can Be a Roadblock for Startups

It can often hinder startups and other businesses without long-established credit lines. One of the biggest hurdles for startups is that it can be far harder to rent and finance equipment, which makes it a difficult prospect of competing against other established businesses even harder. My advice to startup businesses is this: if you’re worried about your FICO score preventing you from the equipment you need, schedule a meeting with the company you’re looking to purchase from. Sometimes, a meeting can lead to arbitrary credit minimums to be waived.

Rob Bartlett, WTFast

 

Low FICO Score Requires Larger Down Payment Or Collateral

Companies with low FICO scores have a harder time finding affordable equipment at reasonable rates. Many equipment lenders reject FICO scores below 550 – 625. The ones that do offer financing require larger down payments or make requests for collateral in their contracts. In a financing agreement, business lenders often treat the rented equipment as the collateral, repossessing it if a business defaults on their loan. This ensures the lenders don’t lose any money, minimizing their risks in working with a company that has a poor financial reputation.

David Aylor, David Aylor Law Offices

 

FICO Credits Go Beyond Just Getting a Loan

When it comes to financing business equipment, the most obvious impact your FICO score has is the ability to obtain financing, interest rates, and loan terms. However, FICO scores also have a secondary, significant side effect. Your FICO score can have a negative effect on your ability to acquire the best equipment for your business. Typically, top-of-the-line and exceptional equipment is more expensive than regular and basic equipment. This means that if your FICO score is low, you may not be able to afford the same or better equipment than your competitors and obtain a loan as large as needed to get that top notch equipment.

Hector Ruiz, BBQ Grill Academy

 

Good FICO Score Helps You Build a Financial Foundation

At the beginning of your business journey, the name of the game in finance is loans and bursaries. One of the most surefire, and fool-proof ways to get a business off the ground is to look for comprehensive business loans that can help you build the strong foundation you need to start developing brand identity. Most small businesses don’t have the funds to finance all the equipment they need, so they turn to bank loans.

The problem is, without a good FICO score, many financial institutions might not trust you with specific business loans, making it difficult to finance your business in those crucial early days. A huge part of business is maintaining your financial standing and monitoring your credit. Think of your business like a teenager who has just opened their first bank account. They don’t know how to handle their finances yet, but by helping them build a strong foundation, they can mitigate the risk of problems in the future.

Peter Robert, Expert Computer Solutions

 

FICO Scores Help Lenders Determine Your Risk To Them

It helps lenders determine the risk of providing a loan by assessing the potential for default or missed payments. A FICO score gives lenders a better view of the risk involved with lending money to a company or individual. The higher the score, the less risk involved. A low FICO score could indicate a high risk of default, and that’s why interest rates are higher for individuals with low scores.

Fiona Lee, Notta

 

Low FICO Scores Can Disrupt Financing Agreements

While many companies aren’t willing to drastically change their rates for customers with varying credit scores, a low FICO score can absolutely disrupt a financing agreement. To radically increase financing rates for customers with lower FICO scores can put a company at risk of negative PR–no company wants to seem like they’re taking advantage of more disadvantaged customers. But that doesn’t mean a transaction can’t fail to go through because a customer’s credit doesn’t reach the benchmark FICO score. Sometimes, the risk isn’t worth the sale.

Alex Wang, Ember Fund

 

 

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