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A Guide to Bad Credit Asset Finance

For some businesses that have a bad credit score, the idea of taking out a business loan can seem unachievable.

Many lenders won’t provide a traditional loan to a business with low credit, for fear of them not being able to pay it back.

If you are in this position, but you are in need of a boost to your finances, there is a type of loan that could help you.

Bad credit asset finance is a way of gaining finances to purchase a certain asset, and this asset can then act as collateral for the loan.

So how does this work? And how could it benefit your business?

Let’s find out.

What is Bad Credit Asset Finance?

Most businesses need relevant and high-quality equipment and machinery to fulfill their role as best as they could.

From architects to accountants, without the right tools, the job becomes a lot harder.

Unfortunately, a lot of this equipment is expensive, and many businesses struggle to raise the funds. If this business is one with a bad credit score, then it can seem impossible.

A great solution to this is bad credit asset finance. This is a loan that helps a business owner raise funds to purchase some equipment and then uses that equipment as collateral.

This will allow the business owner to borrow more than their credit score would normally allow, under the caveat that if they don’t pay back what they owe, the asset they purchased with the money is taken away by the lender.

Bad credit history can be a burden for a business, and can leave them struggling to perform their job without the right equipment, and in this case a bad credit asset finance can be a really useful solution.

How Does Bad Credit Asset Finance Work?

In a traditional loan, the cost of the loan offered is used by calculating how much the borrower can realistically pay back, based on their financial health and credit score.

Asset finance takes a different approach, and the amount of money lent is usually based on the price of the equipment.

As the asset is being used as collateral, the lender can be assured that they can regain the money lent by seizing the equipment.

This takes some of the burden away from the borrower, as their finances are scrutinised less, with the equipment carrying the financial weight behind the loan.

Assets can range in price, and therefore the amount borrowed can vary greatly, but the idea is that with the equipment in question, the business owner can push on and start raising more money which will help pay back the loan.

If all a business needs is one piece of equipment to really allow them to take on more work and start boosting their finances, this is the perfect loan for them to take out, especially if they are struggling from bad credit.

lady working with heavy machinery

Benefits of Bad Credit Asset Finance

Access to Funding Despite Low Credit Score

Bad credit can feel like a weight on the shoulders of many business owners.

With a poor credit history, gaining the funds needed to scale and grow a business can be tricky, and the reality of improving the score could be a long and tough process.

Bad credit asset finance is a way of gaining the funds you need to improve your business, and can be the perfect solution when a low credit score is stopping you from getting a more traditional loan.

The loan approval process is more lenient, and credit checks may be less thorough, allowing a business owner to secure the funding they need.

Improve Your Credit Score

One of the best ways to improve your credit score is by taking on a loan such as this and paying it back in the right way.

When you are consistently meeting your payment obligations, this will show on any future credit checks and your credit score should rise.

This makes this type of loan a win-win, as you can gain funding despite your low score, and improve it for the future, making a wider range of loan types a more realistic possibility.

Quick Turnaround Time

Due to the nature of asset finance, the time it takes to process the loan and provide the funds is much shorter than more traditional types of loan.

This is because the loan amount is often based on the price of the asset. This means there isn’t as much calculation needed to decipher this. The credit checks are also quicker as you are using the equipment purchased as collateral, rather than relying solely on your own finances.

This can mean that you have the equipment you need ready to go within a few days in some cases.

Gain an Asset

One of the key benefits of this type of loan is that it provides a way to gain valuable equipment for your business. The type of asset that can be purchased is really varied, and it can range from new technology such as computers, to heavy machinery used in construction, for example.

While the loan is in place, you have ownership of the asset, and once it is all paid off you then have full ownership and it is completely yours.

If you are in need of more vehicles, equipment, or machinery, and you know that having these would be a big boost to your business, then this would be a great way to gain them without putting too much financial strain on your business.

No Additional Collateral

The last thing anyone wants is to end up owing a lot more money than the loan added up to.

If a business owner is struggling to pay a loan back, then the interest and payments required may begin to rise, leaving them in a position where collateral is taken which can adversely affect their business.

In most cases with asset finance, the only collateral needed is the equipment that was purchased with the loan. The loan amount will be the cost of this equipment, and therefore if you can’t pay it back, while it is not good that the asset is taken, you are simply back at square one.

This removes the fear of further collateral being taken and your business being put into a dangerous situation.

man stood in front of barrells

Bad Credit Asset Finance from Smart Funding Solutions

If you are a business with bad credit seeking a new asset, then why not get in touch with Smart Funding Solutions. We can provide an asset loan in a few days, getting your business back on track in no time.

Want to know more? Contact our team today who can provide more information.

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