Why Has My Equipment Leasing Company Turned Me Down For Credit?

If you are an SME or start up business that needs to find smart ways of financing your business plans, you may well be hoping to set up a lease agreement to fund the acquisition of essential equipment. Or perhaps leasing to fit out your office or upgrade your IT systems.

So what can you do if you find out you have been turned down for leasing by a particular leasing company?

The first thing to do is find out why.  Leasing companies are under no obligation to provide an explanation as to why a leasing application has been refused, and they made refuse to do so for commercial reasons. Reasons why include:

• They are fully committed, i.e. they have some leases with you already and do not want to extend the facility
• You have missed some payments with them
• You have not been trading long enough
• Your accounts are showing a downward trend
• Poor liquidity on your accounts
• Accounts not filed on time
• They do not ‘like’ the sector – retail, construction and recruitment companies inparticular suffered due to this in the recent recession
• They do not ‘like’ the equipment – photocopiers, telecommunication equipment or construction equipment
• The supplier is not strong enough
• Your credit rating is poor
• You have bankrupt companies against your name
• Your location
• The amount to be financed is too high compared to the company balance sheet
• And many more reasons…

Next steps if turned down for credit by a leasing company

Sometimes, if you have been turned down for credit, you can appeal the decision and/or provide more information. More often than not, the finance company will stick to its original decision: while a Credit Manager does not get fired for rejecting your credit application, he or she may get in trouble for an acceptance that goes wrong!

Try, however,  to find out what the key reason(s) are. They may be simple to fix. For example, if the finance company is fully committed you can simply approach another leasing company. If the leasing company does not like your chosen supplier, you can, of course, change the supplier.  Should your accounts show a downward trend it may be that you can offer management accounts and bank statements that indicate a recent improvement?  If you have not been trading long enough, are you in a position to offer a personal guarantee, or maybe provide a larger deposit?

It is always better to provide as much data as you can. Credit analysts have to look through many deals every day and they tend to make decisions quickly, especially where there is limited information.  A well written proposal will make your credit application stand out.

This is where your leasing broker comes in. A good leasing company can package up information in a way that the funder finds most acceptable.  Where the job of finding a credit facility falls on the shoulders of the supplier, especially in sectors such as photocopiers, you may find that they do not have the technical expertise to package a lease deal up and send it to a leasing company.

So in summary, if you find yourself turned down for leasing…

1. If possible, find out why you have been declined
2. Provide as much positive information as you can
3. Change your proposal to make it more interesting
4. Contact  another leasing company

For more information about obtaining a leasing deal please contact WestWon on Tel: 01494 611 456. Alternatively, you can download our free Guide To Leasing.