Choosing A Better Loan

Equipment Financing: What To Do When Your Credit Is In The Toilet

by Görkem Talsma

Starting a business or starting over in business is never easy. You are always worried how you will manage to pay for all of the equipment you need. If you finance, you have to be mindful of previous setbacks and how they reflect on your credit. If your personal credit score is already so low, you may have even more difficulty securing the funds for your business venture. Thankfully, there are ways around personal credit problems.

Find a "Shark"

A "shark" is a business investor who places his or her money and trust into your hands to help you build a business. It may not be the best means of equipment financing for everyone, but if you have been unsuccessful at securing funding from most traditional sources, a shark may be your best answer. Just be aware that most of the terms of the agreement between you and the shark will probably involve either a percentage of your profits for a specified time or controlling interest in your business, sometimes both.

Use Your EIN or TIN When You Apply for Financing

Some business financing companies do not look at personal credit histories and only want your EIN (Employment Identification Number) or TIN (Tax Information Network ID). Both of these are separate entities from your personal credit history, so if you have personal credit problems, your EIN or TIN will not reflect that. What these business identification numbers will show are your previous business endeavors and any tax history associated with the numbers, so if you filed for bankruptcy for a previous business endeavor with the same EIN or TIN, that will be reflected in the records you want the financier to consider. You may also apply for a new EIN or TIN for each new business identity you create, thus presenting a "fresh start" for your new business.

Accept That Your Best Option May Be a High Interest Rate

Sometimes financiers are willing to take a risk on your high-risk credit score. However, this will mean that you have to accept a high interest rate on everything you finance. If you are quite certain that you will make and pay back all of the money you borrow and then some within a very short time, then this may be an acceptable risk for you. As you pay off the high-interest loan quickly, it improves your credit worthiness with the financier and reduces your interest rates on any future equipment financing you will need.