According to the State of Consumer Credit Report 2024, 37% of Americans have been charged late fees on delayed payments on personal credit cards. To help your business receive the best odds of getting approved for equipment financing, there are four common credit issues to look into before applying.
4 Commons Credit Issues for Businesses…
- Recent Losses
- Restrictions on Used Equipment
- Young Businesses and Start-ups
- Financing That Doesn’t Meet Your Goals
In this article, you will learn about four common credit issues and solutions to overcome them so you can get one step closer to financing equipment with Beacon Funding.
Main Cause of Bad Credit in 2024
As of November 2023, 4 out of 5 U.S. citizens were trying to improve their credit score. There are major factors resulting in bad credit. These are the most common reasons:
- Delayed Payments. Your payment history contributes to a whopping 35% of your FICO score. As per this logic, even a single delayed payment can hurt your credit significantly.
- Higher Credit Usage. If your credit utilization ratio (CUR) exceeds 25%, it may reflect poorly on the overall credit history. That’s why you should keep your CUR low if possible.
- New Credit Application. Whenever you apply for new credit, your credit report undergoes strict scrutiny, resulting in a small drop in your score. Bad credit may stem from applying for different accounts in a short period (which makes lenders doubtful).
- Limited Credit History. Around 15% of your FICO score comes from the length and duration of an individual’s credit history. So, a brief history of credit management causes a drop in your score in the absence of other strong factors.
- Identity Theft & Fraud. Identify theft can damage your credit as well. That’s why you must keep a watchful eye on your accounts to catch fraud before it ruins your credit history.
To maintain good credit, it’s critical to make all payments on time, keep credit card balances low, limit new credit applications, and monitor your credit report for errors or signs of fraud.
If you’re interested in applying for equipment financing, it’s important to take care of any personal credit issues you have before applying. Check out how to solve common credit issues so you can be in a stronger position when you apply.
Common Credit Issues Facing Customers
Let’s discuss the four major credit issues facing businesses in 2024. We’ll also provide you with the ideal solution to overcome these problems and improve your credit score.
1. Recent Losses
Often, businesses growing the fastest have the most expenses and may show losses during a fiscal year.
Many traditional lenders have to tell long-standing customers that they cannot extend additional credit because of a recent hiccup in their performance. After all, even the best-performing firms can have bad years.
2. Restrictions on Used Equipment
For the right buyer, used equipment offers great value. Unfortunately, many businesses in 2024 simply cannot take advantage of these opportunities due to the following factors:
- Many businesses struggle with a decelerated cash flow that restricts their ability to make down payments for equipment. The lack of working capital can make them miss out on amazing deals for used equipment as well.
- Some traditional lenders may not finance used equipment or equipment that isn’t sold by a vendor or dealership.
What can you do?
Find a lender that understands your equipment.
A quality lender will have options available to you on both new and used equipment. Just because equipment has been pre-owned doesn’t mean it can’t generate revenue for your business. In addition, a reputable lender should be able to help you when you purchase from a private party.
3. Young Businesses & Start-Ups
It’s hard to keep a young business open, mostly due to slowed-down cash flow or insufficient working capital. In June 2024, 28,000+ new businesses were formed in the US, even though just 1 out of 4 has the potential to make it past the second year.
Missing out on new opportunities because you lack enough cash is frustrating. Without enough cash, you can’t run daily operations, cover unexpected costs, or take advantage of an opportunity. In short, it will severely limit your firm’s ability to operate efficiently and capitalize on new opportunities in 2024.
For instance, your company won’t be able to:
- Fund everyday operations or meet unexpected expenses.
- Capitalize on growth opportunities or invest in M&A initiatives.
- Pay vendors for supplies.
The solution?
Work with a financing partner that understands your company’s potential. At Beacon Funding, we believe in helping young and small businesses. We know newer businesses with consistent daily revenue streams have untapped borrowing potential.
As a nice lender, Beacon Funding is focused on working with businesses in the tow truck, screen printing, embroidery, and landscaping industries. We are focused on helping you succeed.
4. Financing That Doesn’t Meet Your Goals
Most lenders have a “one-size-fits-all” approach to financing equipment. Therefore, the approvals they offer might not make sense for your business and what you are trying to achieve.
The reality is every business is unique and has different priorities when it comes to financing.
- A newer business might have a tight monthly budget and need a monthly payment that fits.
- An established business might not have many moving pieces and needs to keep upfront costs at a minimum.
The answer?
Talk to a financing consultant who understands what your business needs. Talk to us about your concerns with your financing. That way, we can customize your equipment financing to your business goals. We can help you find financing that overcomes your business's unique situation, whether your obstacles are:
- Upfront costs
- Uneven revenue streams
- Business seasonality
- Budget concerns
With Beacon Funding’s financing solutions, we offer a variety of ways to help you achieve your goals and help you get the equipment you need.
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