What to do after an equipment financing decline
A no from one lender is an answer about one program, not about the business. Most declines come down to a short list of reasons, and several of them have nothing to do with whether the business can make the payment.
Why equipment financing gets declined
- Time in business. Many programs start at two years, so a younger company gets turned away before anyone looks at the rest of the file.
- A thin file. An established company whose past borrowing was all with a bank can look new on paper, because a lot of banks don't report to the equipment credit bureaus.
- The equipment. Age, type and resale value matter, and some lenders won't touch certain categories at all.
- The size of the request. A deal can simply fall outside the range a program was built for.
- Credit history. Late payments, recent collections or a lot of new debt in a short stretch.
Ask why
In most cases a lender has to give you the reasons for a decline if you ask. That's the Equal Credit Opportunity Act, and it covers business applicants, not just consumers. The reason matters, because it tells you whether the next application should look the same as the last one.
What the answer tells you
If it was time in business, look for a lender that reviews newer companies, and expect to provide a little more than the application. If it was a thin file, that's a gap in the record, not a problem with the business, and it's often fixable with a little more information. If it was the equipment or the size of the deal, the fix is usually a different lender or a different structure, not a different business.
Don't send it everywhere at once
Owners who send the same file to every lender they can find in one afternoon often end up worse off. Each application can mean another credit inquiry, and a file that's been shopped to a dozen lenders reads as a business in a hurry. One or two well-chosen applications usually beat ten scattered ones.
The fastest yes isn't always the right one
After a decline, offers tend to show up fast, and some of them are merchant cash advances: money against future sales, paid back through daily or weekly debits from the business account. Plenty of owners who took one to keep a purchase moving found that payment schedule harder to live with than the equipment payment they were trying to get in the first place.
A second look at iFinancial Group
iFinancial Group is a direct lender, so a file sent here is underwritten here and not shopped. It starts with the same one-page application: no tax returns and no audited financial statements to apply, no minimum and up to $1,000,000. A business under two years old will usually need a little more, and we'll say so up front. An approval holds for up to 60 days, and there's no obligation until you sign off on the terms.