Can I get equipment financing with bad credit?

Reviewed by Turan Zeynal, Managing Partner, Outset Funding Partners · Last reviewed July 17, 2026

TL;DR

Yes — often more easily than a standard business loan. Because the equipment is collateral, lenders can accept 550–580 FICO with a larger down payment (typically 15–25%) and higher APR (18–30%). Titled equipment (trucks, trailers) and serialized equipment (industrial machinery) are easiest to finance because they have clear resale markets.

Quick facts

Minimum credit accepted: 550 – 580 FICO with most lenders
Down payment (bad credit): 15 – 25% typical
APR range (bad credit): 18 – 30%
Best-fit equipment: Titled / serialized / high resale
Term length: 24 – 60 months typical
Personal guarantee: Required

The 60-second answer

Bad credit doesn't close the door on equipment financing the way it closes the door on bank loans and SBA financing. The equipment is the collateral — as long as the lender can repossess and resell it if you default, they can accept lower FICO scores. Prices adjust up, terms compress, but the door stays open.

The two things that make the biggest difference: the equipment (titled, serialized, and easily resalable is best) and the down payment (15–25% shows the lender you have skin in the game and reduces their exposure).

How it works, step by step

Understand your actual credit picture
Pull your FICO and business credit reports. Dispute errors before applying. Know the number so you can filter for lenders that accept it.
Choose equipment with a strong resale market
Titled equipment (trucks, trailers, buses) and industrial machinery are easiest to finance with bad credit. Specialty and custom equipment is harder because resale is thin.
Save a larger down payment
15–25% down is the norm for sub-620 FICO. This reduces the lender's exposure and often unlocks approval when 0% down doesn't.
Consider vendor-arranged financing first
Equipment vendors have relationships with sub-prime friendly lenders. A vendor rep can often get approvals that direct-to-lender applications can't.
Read the contract carefully
Bad-credit equipment financing sometimes includes higher prepayment penalties, insurance requirements, and default terms. Understand all of them before signing.

Why equipment finance is the softest credit box in business lending

Equipment lenders underwrite the collateral first and the borrower second. If the asset is titled, easily repossessed, and has a liquid secondary market — trucks, trailers, medical imaging, forklifts, restaurant equipment, dental chairs — approvals happen at credit scores that would get a term loan or LOC declined instantly. It's common to see approvals at 550 FICO, occasionally at 500, with a 10–20% down payment offsetting the lender's exposure. The rate is higher than a prime-credit borrower would get (18–28% APR range at the bottom of the credit spectrum), but the deal still gets done, which is the point.

Two levers move the outcome. First, the size of the down payment: putting 20–30% down instead of 10% turns a marginal file into an easy approval and cuts the rate noticeably. Second, the age and resale value of the equipment: new or 1–2 year used titled assets get financed at any credit; 10-year used specialty equipment with a thin resale market often can't be financed at all regardless of credit.

A frequently missed option: sale-leaseback on equipment you already own. If you've got a paid-off truck or piece of shop equipment on the books, an equipment lender will buy it from you and lease it back — turning idle collateral into cash without requiring strong credit.

Pros and cons

Pros

✓Real approval path down to 550 FICO
✓Equipment collateral reduces lender risk
✓On-time payments rebuild business and personal credit
✓Section 179 deduction still available (check with CPA)
✓Vendor-arranged financing streamlines approval

Cons

×Materially higher APR than prime-credit borrowers
×Larger down payment requirement
×Shorter terms mean higher monthly payments
×Repossession risk is real — the equipment is on the line
×Some lenders require additional collateral (a second UCC lien on business assets)

Who qualifies

•550+ personal FICO (some lenders go lower with high down)
•Active US business bank account
•6+ months in business (some accept startups with 25%+ down)
•Ability to fund 15–25% down payment
•Equipment with a defined resale market (titled or serialized preferred)
•No active bankruptcy

Bad-credit equipment financing options

Option	When to use	Watch out for
Vendor-arranged financing	Fastest approval, especially for common equipment types	Not always cheapest — compare with independent lenders
Sub-prime equipment lender	You've been declined by prime lenders	Higher APR and larger down payment; read contract carefully
Equipment lease	You can't fund a large down payment	Higher total cost; may still require guarantee
Used equipment dealer financing	You're buying used equipment through a dealer with in-house financing	In-house financing rates are often the highest of any option
SBA 7(a) if 640+ FICO	You're borderline bad credit and can wait 45–90 days	Under 640, most SBA lenders decline

Frequently asked questions

What's the lowest credit score for equipment financing?

Around 550 FICO with most sub-prime equipment lenders. Below 550, you'll need a substantial down payment (30%+) and additional collateral, and options narrow to a handful of specialty lenders.

Does the equipment type affect approval?

Yes, significantly. Titled equipment (trucks, trailers) is easiest — clear title, established resale market. Industrial machinery with a serial number is easy. Custom-built or specialty equipment with a thin resale market is much harder to finance with bad credit.

How much down payment do I actually need?

15–25% is typical for sub-620 FICO. Some lenders will accept 10% down with additional collateral (a second UCC filing on business assets, or a personal asset guarantee).

Will bad-credit equipment financing improve my credit?

Yes — on-time payments report to business credit bureaus (D&B, Experian Business, Equifax Business) and sometimes to personal credit. 12–24 months of on-time payments can meaningfully improve your credit profile and unlock better rates on future funding.

Can I refinance later if my credit improves?

Yes — this is a common path. Get equipment financing at sub-prime rates now, make on-time payments for 12–18 months, then refinance into a lower-rate loan when your credit improves. Check for prepayment penalties before committing.

What if my business partner has better credit?

Adding a partner with 700+ FICO as a 20%+ owner and personal guarantor can significantly improve approval and pricing. Ownership structure changes are common in the equipment financing application process for this reason.

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