How Credit Scores Impact Equipment Financing in Canada

If you’re applying for an equipment loan—whether it’s for a truck, medical scanner, CNC machine, or commercial freezer—your credit score plays a critical role in determining:

• Whether you’re approved
• What interest rate you’re offered
• How much you can borrow
• Whether you need to offer a down payment or collateral

But many business owners aren’t sure how credit scores work—or how to improve them before applying.

In this guide, we’ll break it down in plain language:
✅ What credit score you need for different financing types
✅ How your score affects rates, approval, and structure
✅ 7 tips to boost your credit and expand your funding options

What Is a Credit Score?

Your credit score is a three-digit number (between 300 and 900 in Canada) that tells lenders how likely you are to repay your debts.

Most lenders use Equifax or TransUnion reports and look at:

• Payment history
• Credit utilization (how much of your limit you’re using)
• Credit mix (loans, cards, lines of credit)
• Length of credit history
• Recent inquiries and new accounts

For equipment financing, your personal score is often just as important as your business profile—especially if your company is new or you're personally guaranteeing the loan.

What Credit Score Do You Need to Finance Equipment?

Here’s a general guideline based on typical 2025 lending trends in Canada:

At Mehmi Financial Group, we help businesses qualify with scores as low as 600, depending on revenue, asset type, and structure. See Financing & Leasing options for more.

How Credit Score Affects Your Equipment Loan

1. Interest Rate

The better your score, the lower your rate.

• A 690 score might yield 11% interest
• A 610 score might result in 17%+

Over a 5-year term, that’s a major cost difference.

2. Approval Odds

Some lenders (especially banks) won’t even consider scores under 650–675. Others will work with mid-range or low credit—but may ask for additional documents, collateral, or a co-signer.

3. Structure of the Deal

Lower scores may mean:

• Shorter term
• Higher monthly payments
• Larger down payment (10–30%)
• More restrictions on equipment type or vendor

Can You Still Get Approved with a Lower Credit Score?

Yes—especially if:

• You’ve been in business 6+ months
• You have strong monthly revenue
• The equipment has good resale value (e.g. truck, trailer, CNC)
• You’re buying used or from a private seller
• You work with an alternative lender or broker

In many cases, we’ve helped business owners secure financing at 640–660 scores, especially when bundling a down payment or including asset photos for private sales.

Learn more in Understanding Equipment Financing Options.

How to Improve Your Credit Score Before Applying

Here are 7 proven ways to improve your credit profile and open up better loan terms:

1. Correct Errors on Your Credit Report

Request a copy of your credit file from Equifax or TransUnion (free once per year). Look for:

• Incorrect balances
• Closed accounts showing as open
• Accounts that don’t belong to you
  Dispute inaccuracies and follow up.

2. Pay Down Revolving Balances

Try to use under 30% of your credit card limits. A $10,000 card with a $9,000 balance hurts your score—even with on-time payments.

3. Avoid NSF or Missed Payments

Make sure your business and personal bank accounts don’t show non-sufficient funds (NSFs), late payments, or overdrafts in the 90 days leading up to your application.

4. Keep Older Accounts Open

Even if you don’t use them, older credit cards help your average account age and overall score. Don’t close them unless necessary.

5. Avoid Opening New Accounts Right Before Applying

Each new credit check can slightly reduce your score temporarily. Time your applications wisely.

6. Bring Business and Personal Accounts Up to Date

Some lenders consider business banking activity (especially if you’re a sole proprietor). Consistent deposits and no bounced payments show you're managing cash flow.

7. Work with a Credit Analyst Who Can Advocate for You

A Mehmi credit analyst can package your application based on your real business story—not just your credit score. We help explain strong revenue or growth outlooks that don’t show up on paper.

Real Case Study: Improving Credit for Better Truck Financing

Business: Owner-operator in Brampton
Credit Score: 615 at time of inquiry
Challenge: Denied by dealer for a $75K used truck lease

What They Did:

• Paid off a $4,000 credit card to reduce utilization
• Submitted clean 6-month bank statements
• Included vendor invoice and photos of the truck
• Secured a 48-month lease with 10% down

Outcome:
Approved in 48 hours at a 15.4% rate—saving over $5,800 compared to the original offer.

Final Tips Before You Apply for Equipment Financing

✅ Check both your personal and business credit reports
✅ Pay off or reduce any high-interest balances
✅ Gather 3–6 months of clean bank statements
✅ Be ready with equipment details and photos (if used or private sale)
✅ Talk to a credit analyst about seasonal payments or structured deals

FAQs: Credit Scores and Equipment Financing

What’s the minimum credit score needed to finance equipment in Canada?
It varies by lender. Banks may require 650–700+, while alternative lenders can approve scores as low as 600, depending on the full application.

Can I get approved with bad credit if I offer a down payment?
Yes. A strong down payment can improve your odds—even with a lower score—especially for trucks, trailers, or used equipment.

Does equipment age affect approval?
Yes. Older or highly specialized equipment may be harder to finance, particularly with lower credit. Newer assets with strong resale value improve your chances.

Can I finance equipment under my business even if my personal credit is low?
Possibly. If your business has strong revenue, some lenders focus on cash flow more than personal credit.

Not sure where your score stands or what you qualify for?
Speak to a credit analyst to assess your options—or use our calculator to estimate payments based on your credit range.