How to Get Equipment Loans with Bad Credit

If you’ve been turned down for a loan or worry your credit score might hurt your chances—you’re not alone.

Many hardworking business owners across Canada face the same challenge. Whether your credit took a hit from personal setbacks, late payments, or growing pains during expansion—it doesn’t have to stop you from accessing the equipment your business needs.

At Mehmi, we believe every business deserves a second chance—and the right equipment can often be part of the solution.

This guide walks you through:

• How bad credit affects your options
• What lenders look for (besides just score)
• Step-by-step strategies to improve approval odds
• Specialized options for challenged-credit business owners
• A real example of how someone made it work

What Is Considered “Bad Credit” in Equipment Financing?

In general, a personal or business credit score under 600 is considered “challenged credit.”

Some banks require 650+ to approve commercial loans. But alternative lenders—including Mehmi’s network—often work with business owners in the 500s or early 600s, depending on other factors.

What Lenders Look At (Beyond Just Your Score)

Even with a lower score, many lenders will still consider your deal if you can show:

✅ Consistent business revenue (even modest)
✅ A strong vendor quote and clear purpose for the equipment
✅ Business registration or incorporation
✅ A bank account in good standing
✅ Willingness to provide a personal guarantee or small down payment

In other words: bad credit isn’t an automatic no—especially if the rest of the picture looks good.

Step-by-Step: How to Get Approved with Bad Credit

Step 1: Be Honest About Your Situation

Start by reviewing your credit report through:

• Equifax Canada
• TransUnion Canada

Look for:

• Errors or outdated items
• High utilization (credit card debt)
• Missed payments that can be resolved

This gives you a clear baseline to improve from—and ensures your application is accurate.

Step 2: Apply for Equipment Financing Strategically

Don’t shotgun your application to dozens of lenders. This can lower your score further.

Instead:

• Work with a broker like Mehmi who understands challenged-credit financing
• Be upfront about your situation
• Let us find lenders who are willing to work with you (some even specialize in 500–600 credit ranges)

Explore:
Financing & Leasing

Step 3: Strengthen Your Application with These Tactics

Here are several proven ways to increase approval odds:

✅ Put Money Down
Even a 5–15% down payment signals commitment and reduces lender risk.

✅ Add a Co-Signer or Guarantor
A partner, family member, or investor with stronger credit can help unlock better terms.

✅ Offer Additional Collateral
If you already own equipment, inventory, or even a vehicle, this can support the loan.

✅ Apply for a Smaller Amount First
Start with a manageable purchase—then refinance or scale once you’ve proven reliability.

✅ Provide Bank Statements or Contracts
Even if your credit is low, showing consistent income or signed contracts builds lender confidence.

Step 4: Improve Your Credit Over 6–12 Months (While You Operate)

If you’re not in a rush, here’s how to steadily rebuild:

• Pay down credit cards to <30% utilization
• Set up automatic payments to avoid missed bills
• Open a secured business credit card and use it monthly
• Avoid applying for multiple new accounts too quickly
• Keep older accounts open (credit age matters)

Real Case Study: Trucker Rebuilds Credit and Gets Approved

Business: Alberta-based owner-operator with 542 credit score
Need: Used 2018 reefer trailer ($37,000)
Challenge: Missed payments during COVID, declined by two banks
What We Did:

• Structured deal through one of Mehmi’s challenged-credit lenders
• Used co-signer (brother) and 10% down
• Loan term: 48 months, 14.9% fixed interest
• No penalties for early payoff

Outcome:
Made consistent payments, boosted credit to 622 in 11 months.
Approved for second truck the following year—without co-signer.

What Kind of Equipment Can Be Financed with Challenged Credit?

Even used or private-sale items can be financed—with the right lender and documents.

FAQs: Bad Credit and Equipment Loans

What’s the minimum credit score I need?
Some lenders go as low as 500–550, depending on the deal and collateral.

Will applying hurt my score?
Not if you work with a broker who pulls soft credit first or minimizes inquiries. We match you to the right lenders before submitting formal applications.

Can I still get a $0 down deal?
It’s harder—but not impossible. Strong revenue or a co-signer helps.

How long until I can refinance for better terms?
Usually after 6–12 months of on-time payments. Many Mehmi clients refinance to lower rates as their credit improves.

Final Word: You’re Not Alone—And You’re Not Out of Options

Bad credit happens. It doesn’t mean your business can’t grow—or that you’ll be stuck forever.

With the right guidance and lender network, you can:

• Secure your first piece of critical equipment
• Rebuild your credit
• Create a foundation for future success

At Mehmi, we specialize in human-first equipment financing—helping entrepreneurs rise, rebuild, and expand on their terms.

Struggling with bad credit but need equipment?
Speak to a credit analyst or use our calculator to explore your options with no obligation.

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