How Credit Affects Your Ability To Obtain Business Supplies
(6 min read)
We’ve all been there — our credit score makes an impact on big purchases in our personal life as well as with purchases for our business. If you’re looking to lease equipment for your business, you may be wondering if your credit score will impact your ability to obtain the supplies you need. In this blog, we will explore how credit can affect your ability to secure the supplies and equipment necessary for your business to succeed.
What does “good credit” mean?
Your credit report is an unbiased picture of your credit history—how you’ve handled money in the past. It answers questions lenders ask when they want to determine risk. It’s also important to note that in the case of partnerships and sole proprietors your personal financials are taken into consideration, and for corporations only your business financials are considered.
Here are some of the factors that impact your credit score:
It’s important to understand that all of these factors work together in order to maximize your credit score so you can get the best possible lease agreement. During the leasing approval process, a lender will look at all aspects of your credit history. Negative credit events within the last five years, such as filing for bankruptcy, filing a consumer proposal, undergoing debt consolidation or frequently defaulting on payments, leasing will not be an option. Many leasing companies also like to have at least two years’ worth of business activity to base their lending decisions on, but others such as Arbutus Capital will provide leases to newer businesses. If your business documentation is insufficient, you may need to provide personal financial documentation.
How to Improve Your Credit Score
It pays to do what you can to improve your credit rating before applying for a lease, but boosting your rating can take time and dedication.
Here’s what you can do to boost your credit score:
There are no quick fixes to improving your credit score, so it’s important to be patient and persistent in trying to build a good credit history.
Why Credit Impacts Equipment Leasing
Your credit report is a judgement about your financial health at a specific point in time, illustrating how you’ve managed money in the past which can help a lender determine the risk you present compared to other customers. Equipment leasing is a powerful growth tool for your business that provides more flexibility than a traditional bank loan — and is also easier to get. That said, your credit score still has a part to play when it comes to whether or not you’ll be approved for a lease. A leasing company is taking a risk by lending you equipment, and your credit score is an indicator of whether or not you can make your payments on time. In addition to making it easier to get that lease, having a good credit rating can help lower your monthly payments and reduce your upfront payment.
A good credit history makes getting an equipment lease easier, but what if you’re a newer business with less history? Leasing is still an option if you are a new business — you’ll just have to start with leasing lower cost equipment first to build up that credit. If you are thoughtful and strategic in acquiring your early assets, you’ll be in a good position to grow down the road and show you’re a good credit risk. Having a strong business plan, no matter how long you’ve been in business, is a big bonus to achieving a lease.
A lack of information is the most common reason a lease application will be declined. Working on improving your credit score, providing as much information as possible, and starting small with the equipment you’re leasing will help you have better luck with getting a lease in the long run.
Leasing companies like Arbutus Capital may consider other factors to determine your risk level, such as your business’s revenue and cash flow, in addition to your credit score. We believe that even if you find yourself with imperfect credit, our empathetic and relationship-focused approach can still work with you to find flexible and creative solutions for your business. And we want to see new businesses thrive, even without a long credit history.
Ultimately, having a good credit score plays a crucial role in determining your ability to lease equipment. By taking steps to improve your credit score, and working with companies like Arbutus Capital who can help you explore different financing options, you can secure the supplies you need to help your business succeed. We’re here to help guide you every step of the way and get you the equipment you need — contact us today to get started.