Bad credit asset finance: how to get equipment funded with a weaker credit history

Bad credit asset finance is funding to buy or lease equipment, vehicles or machinery where the asset itself acts as security for the lending. This guide is for business owners and directors with defaults, CCJs, missed payments or a thin credit file who need an asset to trade and are worried they will be turned down. Because a lender can recover the asset if repayments stop, some will look past a weaker history if the rest of the application stands up. Smart Funding Solutions knows which lenders on its panel take that approach and can approach them for you.

For how asset finance works in general, including hire purchase and leasing, see our asset finance hub.

01How lenders view different credit problems

Not all adverse credit is treated alike. As a general guide:

Our guide to getting a business loan with a CCJ goes into judgments in more depth.

Asset finance is often one of the more realistic routes where a director has an insolvency history. Our guide to raising finance when a director is in an IVA covers what lenders ask about the arrangement and what the supervisor may need to approve.

02What lenders weigh instead of your credit score

• The asset: its type, age and resale value. Vans, plant and mainstream machinery that hold their value are easiest to fund.
• Affordability now: current income and bank statements that show repayments can be met comfortably.
• Deposit: a larger deposit reduces the amount at risk.
• Experience: how long you have traded and your track record in the sector.
• The story: what caused the problems, and evidence that they are resolved.

Credit checks still take place, and every lender makes its own decision.

03Which assets are easiest to fund

Most business assets with a reliable resale value can be financed, including vans and commercial vehicles, construction plant, manufacturing machinery, agricultural equipment and catering equipment. Hard assets that hold their value are much easier to fund with weak credit than soft assets such as software or fit-outs. If you already own equipment, asset refinance may raise cash against it.

Sector guides: bus and coach finance and motor trade finance.

04Application checklist

Our guide to improving your business credit score has more on the first step.

05Benefits

• Access to equipment despite past issues: security in the asset can open doors that unsecured lending would not.
• Protects cash flow: you spread the cost rather than paying up front.
• Helps rebuild credit: repaying on time adds positive history to your file.
• Security usually limited to the asset: often no property security, although personal guarantees are common.

06Drawbacks and risks

• Higher cost: lenders price in the extra risk.
• Deposit may be needed: sometimes a substantial one.
• Repossession: if you fall behind, the lender can take the asset back and you may still owe any shortfall.
• Personal guarantees: directors or owners may be asked to guarantee the agreement.
• Fixed term: early settlement may carry charges.

07Pitfalls to avoid

• Applying to several lenders yourself in quick succession, leaving multiple searches on your file.
• Accepting a large balloon payment to make monthly costs look affordable.
• Choosing an older or niche asset that lenders struggle to value.
• Not reading the total amount payable, fees and early settlement terms.

08Alternatives to consider

Depending on your situation, invoice finance, a merchant cash advance or a secured loan may fit better. Our page on bad credit business loans compares them.

09Bad credit van, vehicle and machinery finance

Vans, commercial vehicles and mainstream machinery are usually the easiest assets to finance with bad credit, because they hold their value and are easy for a lender to resell. How a lender treats your application still depends on the type of asset and on whether you borrow as a limited company or as a sole trader.

Vans and commercial vehicles

Panel vans, pickups and light commercials are widely financed by lenders that consider adverse credit, often on hire purchase. Lenders look at the vehicle's age and mileage, your deposit and recent bank statements. See van finance for the options.

Taxis and private hire vehicles

Lenders weigh your licence, your platform or circuit income and the vehicle's suitability for licensing. Our taxi finance page covers this in more detail.

Plant and machinery

Excavators, telehandlers, forklifts and production machinery from recognised makes are often fundable, even used, if the lender can value them. Older or bespoke machines are harder, and a larger deposit may be needed.

Sole traders and limited companies

Whichever you are, a recent, settled credit problem with a clear explanation is treated far better than one that is ongoing. We approach lenders on our panel that consider weaker profiles, so the asset is matched to a lender that funds it.

10Asset finance loans with bad credit, which option fits

An asset finance loan is borrowing secured on equipment or vehicles rather than on your home or the business as a whole. Because the lender can recover the asset, it is often the easiest kind of finance to get with a weaker credit history. These are the main types.

Excavators, telehandlers, forklifts and production machinery from recognised makes are often fundable, even used, if the lender can value them.

11How to get finance with bad credit, step by step

1. Check your credit files first. Look at your personal files and your company's report so nothing in them surprises a lender, and correct any errors.
2. Deal with any CCJ. If you pay a county court judgment in full within one month, you can get it removed from the register. Otherwise it stays on the Register of Judgments, Orders and Fines for 6 years (GOV.UK, CCJs and your credit rating). A satisfied judgment reads better than an unpaid one.
3. Choose an asset with a good resale value. Vans, plant and machinery with an established used market are easier to fund than specialist or bespoke kit.
4. Offer a deposit if you can. A larger deposit reduces the lender's exposure and can widen the choice of lenders.
5. Explain the history. A short note on what went wrong and what has changed helps an underwriter more than silence.
6. Apply selectively. Several hard searches in a short time can make lenders more cautious, so approach lenders likely to say yes.

12How we can help