Equipment financing with bad credit in Canada

Written by

Alec Whitten

Published on

November 25, 2025

How Equipment Finance Providers Work With Canadian Businesses That Have Past Credit Challenges

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If your business has late payments, collections, or even an old bankruptcy, you can still get equipment financing in Canada. Most equipment finance providers don’t stop at your credit score—they lean on asset-based structures, stronger collateral, real-time cash flow, and smarter deal design to turn a “maybe” into a “yes.”

This guide breaks down how that actually works in practice, what changes when your credit isn’t perfect, and how to position your business so an underwriter can say “approved” without stretching the truth.

The reality: past credit challenges are common for Canadian SMEs

Past credit trouble is far more normal than most owners think, and it does not automatically kill your approval.

Statistics Canada’s 2023 SME financing data shows that almost half of Canadian SMEs requested external financing that year, and approval rates sat around 88–89%—meaning a meaningful minority were declined or didn’t get everything they asked for.(ISED)

On top of that, federal classification work and Equifax data suggest that a large share of Canadians have thin or limited credit histories, which complicates traditional scoring.(equifax.ca) And when businesses don’t apply for financing, one of the top reasons is that owners assume the request will be turned down or find eligibility and application requirements too daunting.(Statistics Canada)

In other words:

You’re not the only one with a rough-looking bureau.
There is a whole segment of the finance industry—especially asset-based lenders and equipment lessors—built to work around imperfect credit.

That’s exactly the segment Mehmi plays in with solutions like Equipment Financing, Equipment Leases, and Asset Based Lending.

How equipment finance providers think about risk (and why they don’t only look at your score)

Equipment finance providers use the same “five Cs of credit” language your bank does—but they weight things differently, because they’re asset-based.

According to BDC, lenders look at Character, Capacity, Capital, Collateral, and Conditions, not just a single number.(BDC.ca) Asset-based lenders twist that model slightly:

Character – Your track record, honesty, and how you’ve handled issues. A past problem is less scary than a current one you’re hiding.
Capacity – Can your business cash flow the new payment based on recent bank statements, contracts, and margins?
Capital – How much of your own money is in the business? Can you put some down, if needed?
Collateral – The big one for equipment providers. The asset itself (truck, CNC, oven, scanner) is core security for the deal.
Conditions – Industry risk, economic outlook, contract quality (e.g., a signed haulage contract vs. hope and vibes).

The Canadian Finance & Leasing Association describes asset-based finance as a system where the equipment or vehicle itself is the principal collateral and is slowly paid off through a lease or similar contract.(cfla-acfl.ca) Likewise, asset-based lending providers emphasize that they focus more on the quality and value of the collateral than on a spotless credit history.(uCapital)

That’s the key advantage for a business with bruised credit:

If your equipment is solid, your cash flow is decent, and your story makes sense, an equipment funder can often move forward even when a traditional bank backs away.

Mehmi leans heavily on that logic across Eligible Equipment and sector-specific Industries they serve.

How providers structure deals around past credit issues

Equipment lenders don’t have a magic wand; what they do have is a toolbox of risk mitigants they can combine to make a tougher file work: collateral, structure, and extra information.

Using the equipment itself as strong collateral

First lever: lean harder on the asset.

If you’re buying core equipment—trucks, excavators, presses, diagnostic equipment, commercial kitchen gear—that equipment:

Can be serialized and insured
Has resale value in an active secondary market
Is directly tied to your revenue

That’s perfectly suited to:

A standard Equipment Lease
A broader Asset Based Lending facility
Sector-specific programs like Truck and Trailer Financing or Heavy Equipment Financing

Because the equipment is strong collateral, a provider like Mehmi can be more flexible on the credit profile than a bank issuing a generic unsecured loan.

Adjusting term, down payment, and residual to manage risk

Second lever: change the structure, not just the rate.

Here’s how those knobs are used for businesses with past credit challenges:

You might not see all of this language on your term sheet, but it’s what the credit team is playing with behind the scenes.

Looking at real-time business performance, not just old mistakes

Alternative lenders in Canada openly say they focus more on real-time performance than solely on your credit score, assessing daily sales, current revenue, and cash flow strength.(Advance Funds Network)

Equipment finance providers apply the same thinking by asking for:

The last 3–6 months of business bank statements
A current A/R and A/P snapshot
Any contract or PO that the new equipment will help you fulfill

A thin or lower score looks very different if:

Your business account shows consistent inflows and healthy minimum balances
You’re current with suppliers and taxes
You can point to signed contracts or steady demand

Mehmi’s underwriting process, for example, is built to read today’s cash flow, not just yesterday’s credit score. You’ll see that reflected in how they structure Working Capital Loans, Secured Loans, and equipment facilities together.

Combining leases with working capital or factoring

Credit challenges often come from cash flow crunches, not bad businesses. That’s why a lot of stronger “bad credit” approvals include supporting products:

A Working Capital Loan to cover ramp-up costs and keep payments current
A Line of Credit for inventory, fuel, or payroll
Invoice or Freight Factoring to turn slow-paying receivables into near-immediate cash

By smoothing cash flow with these tools, you’re less likely to fall behind on your new lease—and that makes underwriters more willing to recommend an approval.

What changes when you have past credit challenges (versus a “prime” borrower)

Providers absolutely work with B and C credit—but the deal will look a bit different than for someone with spotless bureaus. Expect:

More documentation
- Bank statements, tax filings, maybe personal net worth.
- Lenders want to understand the full picture, not just the score.
More emphasis on guarantees
- Personal guarantees are common, especially for smaller or closely-held companies.
- In some cases, a partner or spouse with stronger credit may help—BDC explicitly notes that adding a guarantor can improve odds for owners with weaker credit.(BDC.ca)
Tighter structure
- Slightly shorter terms or higher payments than “best case” ads.
- More conservative residuals or down payments.
Risk-based pricing
- The rate may be higher than what your bank offers a pristine borrower.
- But that’s often offset by actually getting approved and by a structure that can be refinanced down the road.

Contrarian view:

If you have past credit issues, chasing the absolute lowest rate is usually less important than securing a sustainable approval. A well-structured lease at a fair “B-tier” rate can be a bridge back to prime pricing later.

Mehmi’s Business Loans and Equipment Financing are intentionally tiered this way: help you get the asset now, then improve terms over time as your profile heals.

How to tell your credit story so underwriters can say “yes”

Providers read credit bureaus all day; they’re not shocked by a late payment or a rough year. What worries them is silence or spin.

BDC’s guidance on getting financing with poor credit emphasizes presenting a stronger overall case and addressing the five Cs directly instead of hoping the lender doesn’t notice the score.(BDC.ca)

Here’s how to do that when you apply for equipment financing:

Lay out the timeline of what happened
- “In 2021 our biggest customer went bankrupt; our receivables took a hit; that’s when you’ll see late payments and the consumer proposal.”
- Keep it factual and short.
Show what’s changed since then
- New customers, diversified revenue, better margins.
- Updated internal controls: bookkeeping, invoicing, collections.
Demonstrate current stability
- Clean bank statements for the last 6–12 months.
- Evidence that tax arrears are under control or on a plan.
Offer reasonable mitigants proactively
- “We’re prepared to put 10–20% down.”
- “We’re comfortable with a shorter term if needed.”
- “Here’s a guarantor with a stronger bureau.”
Choose the right partners
- BDC explicitly recommends working with advisors who understand financing and can help you position your file.(BDC.ca)
- A specialist like Mehmi, who lives in asset-based lending, will often see a path to approval that a generalist won’t.

Mehmi’s FAQ and Blog are good places to see how they think through scenarios before you ever fill in an application.

What Mehmi does differently for B & C credit borrowers

Every lender has its own risk appetite, but independent equipment finance companies and asset-based lenders tend to be more flexible than big banks with credit-challenged clients. CFLA notes that these independent financiers play a critical role in filling gaps left by traditional lenders.(cfla-acfl.ca)

Here’s what that looks like in Mehmi’s world:

Leasing first
- Wherever the request is about tangible gear, Mehmi steers toward Equipment Leases and Equipment Financing instead of generic loans.
- That maximizes the value of the collateral and often softens the impact of past credit events.
Refinancing and sales-leaseback
- If you already own good equipment, Mehmi can unlock capital through Refinancing or Sales Leaseback.
- That can consolidate messy short-term debt into a more manageable, asset-backed structure.
Industry-specific expertise
- Transportation? They bring dedicated Transportation Expertise, Truck Repair Financing, and sector knowledge.
- Hospitality? They have tailored models like Rent Try Buy Hospitality.
- This matters: underwriters who actually understand your industry are more likely to see the real risk, not just the stereotype.
Vendor and dealer relationships
- Through Mehmi’s Vendor Program, dealers can offer financing that’s already aligned with credit requirements.
- That reduces friction and helps borderline files get structured correctly from day one.

If you want a feel for the team behind those decisions, the About Us page is a quick snapshot; for a deeper dive, the Homepage and Contact Us give you an easy path to a real person.

Step-by-step checklist: applying for equipment financing when your credit isn’t perfect

Here’s a practical checklist you can work through this week.

1. Pull your own credit reports
Know what the lender will see before they see it. Make a short “talking points” summary of any major events.

2. Clean up what you can

Pay off small collections if possible.
Bring any minor accounts current.
Set up payment plans for larger issues and keep proof.

Even incremental improvements help underwriters see momentum in the right direction.

3. Tighten your cash flow picture

Make sure business revenues go through a single primary operating account.
Avoid avoidable NSFs or wild swings in balances for at least a few months before applying.
Consider using Invoice or Freight Factoring to smooth inflows if customers are slow payers.

4. Decide what actually needs to be financed
List the equipment you need now versus later. Anything with a serial number and productive life probably belongs in:

A dedicated Equipment Lease, or
If you’re larger, an Equipment Line of Credit.

Use Mehmi’s Calculator to ballpark different terms and down payment scenarios.

5. Build a short, honest deal summary
One page is enough:

What your business does and who you serve
What you want to buy and why
How the new equipment will generate or protect revenue
Brief explanation of past credit challenges and what’s changed

This aligns with BDC’s advice to present a clear, well-prepared ask tailored to the lender’s perspective.(BDC.ca)

6. Talk to an advisor who actually does credit every day
This is where you bring it to a team like Mehmi. They’ll:

Help you pick the right product mix (lease vs Working Capital Loan, etc.)
Flag any gaps before the file goes to underwriting
Coordinate with your equipment vendor through programs like the Vendor Program

From there, it’s about responding quickly to any follow-up questions and getting to a structure you can live with in slow months—not just the busy ones.

Case study: turning a “no” into a structured “yes” for a construction subcontractor

Background

A construction subcontractor in the GTA specialized in concrete forming and needed a newer telehandler plus some small site equipment.

6 years in business
12 employees
Mostly GC and developer clients
Past consumer proposal 4 years ago tied to a failed side business
A few late payments on the business credit file during COVID slowdowns

Their bank had recently declined a request for a generic term loan for “equipment and working capital,” citing credit history and leverage.

Need

1 used telehandler and attachments
Some site heaters and a small compressor
Total cost: ~$185,000

Challenge

Owner’s bureau still showed the old proposal and some legacy late payments.
Business had recovered well, but the bank only saw “messy file + unsecured ask.”

How an equipment finance provider approached it (Mehmi example)

Working with a Mehmi advisor, the deal was reframed and re-structured.

Shift to asset-based mindset
- The telehandler and gear were on Mehmi’s Eligible Equipment list and had strong resale value.
- Rather than an unsecured lump-sum loan, they structured a 72-month Equipment Lease for the telehandler package only.
Separate out working capital
- Instead of trying to bury working capital inside the lease, Mehmi provided a smaller Working Capital Loan for initial mobilization and fuel.
- That made it easier for credit to see how each dollar would be used.
Address past credit directly
- The owner wrote a short explanation of the failed side business and how they’d since restructured their personal finances.
- Business bank statements for the past 12 months showed steady inflows and no recent NSFs.
Use structure to de-risk
- The deal included a modest down payment and a conservative residual.
- Telehandler age and hours fit Mehmi’s Heavy Equipment Financing criteria.

Outcome

The subcontractor secured the equipment they needed, on terms that fit their project cash flow.
The working capital facility gave them breathing room at project start-up, instead of forcing them to rob other jobs to fund the new one.
Twelve months later, with clean payment history on the lease, Mehmi was able to consider another piece of equipment at better pricing, using the improved track record as leverage.

The difference wasn’t a secret “bad credit lender.” It was a provider structured around equipment and collateral, willing to look at the full story and flexible enough to use the full risk-toolbox.

FAQ: Equipment financing with past credit challenges in Canada

1. Can my business get equipment financing in Canada with bad credit?

Yes. Many equipment finance providers, including Mehmi, regularly approve B and C credit files. They lean more on the value of the equipment, your current cash flow, and deal structure than on having a “perfect” score. You may pay a bit more in rate or provide a bit more down, but approval is absolutely possible.

2. Do equipment lessors look at personal or business credit?

Usually both. For incorporated SMEs, providers look at:

The business credit profile, if it exists
The owners’ personal credit (especially in smaller or closely held firms)
Current financial performance via bank statements and tax filings

A thin or damaged personal bureau doesn’t end the conversation, but you should expect to discuss it openly and offer mitigants like down payment or guarantees.

3. How much down payment do I need if my credit is challenged?

There’s no fixed rule. With strong credit, some deals go through at $0 down; with past issues, lenders may ask for 10–25% down, depending on the asset and risk. The more you can contribute without strangling cash flow, the easier it is for an underwriter to say “yes.” Mehmi can model this with you using their Calculator.

4. Will a past bankruptcy or consumer proposal stop me from getting equipment financing?

Not necessarily. Many lenders will consider applications after a certain time has passed and as long as:

The proposal or bankruptcy is discharged
Your current accounts are managed cleanly
The new deal is clearly affordable and well structured

What matters most is how you’ve handled your finances since the event. Honest disclosure and a clear story matter more than pretending it never happened.

5. Is it better to wait and fix my credit first, or finance equipment now?

It depends on the opportunity in front of you. If new equipment will:

Unlock a profitable contract
Replace constant repair costs
Eliminate outsourcing that’s eating margin

…then waiting years to get perfect credit can cost more than taking on a properly structured “B-tier” deal today. On the other hand, if the equipment is a “nice to have” rather than essential, you may be better off cleaning up your credit first. A Mehmi advisor can help you weigh that tradeoff based on actual numbers.

6. How can I improve my chances of approval with an equipment finance provider?

A few practical moves:

Keep your business bank account clean and consistent for several months.
Pull your own credit report and be ready to explain any major issues.
Prepare a clear summary of what you’re buying and how it will generate revenue.
Offer reasonable mitigants (down payment, shorter term, guarantor).
Work with a specialized provider like Mehmi through Contact Us instead of just firing off generic online applications.

You’ll find additional tips on Mehmi’s Blog and quick answers to common questions in the FAQ.

Internal links used

External citations used

Statistics Canada – Small Business Credit Condition Trends (2014–2024): approval rates for SME financing requests in Canada (around 88–89% in recent years). (ISED)
Statistics Canada – Reasons businesses did not seek funding: highlights that many firms avoid applying because they expect to be turned down or find requirements too complex. (Statistics Canada)
Equifax Canada – Credit challenges for new-to-Canada consumers: notes that a significant share of Canadians have limited or no credit history, impacting access to financing. (equifax.ca)
BDC – “How to get a business loan even with a bad credit score” & “How to get a business loan in Canada”: explain the five Cs of credit and stress that no single “magic score” guarantees approval. (BDC.ca)
UCapital – Asset-based lending overview: describes how ABL focuses on collateral quality (equipment, receivables) more than just credit history. (uCapital)
Alternative lender and aggregator articles (Advance Funds Network, Smarter Loans, Equipment Finance Canada): show that many Canadian lenders serving weaker credit profiles focus on real-time sales and cash flow rather than only historical scores. (Advance Funds Network)
CFLA – Asset-based finance and annual reports: outline the role of independent equipment and vehicle finance companies in supporting Canadian SMEs alongside traditional banks. (cfla-acfl.ca)

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