Having a less-than-perfect credit history doesn’t mean your business can’t grow. Equipment is central to most Australian businesses: without the right machinery, vehicles or tools, you can’t serve customers, complete jobs or generate revenue. The catch-22 of bad credit equipment finance is obvious: you need equipment to earn income, but past financial difficulties make it harder to access the finance you need to acquire that equipment.
The good news is that Australia’s lending market has evolved significantly. Beyond the major banks (which tend to have rigid credit scoring criteria), there’s a large market of non-bank lenders, specialist financiers and private lenders who specifically work with businesses that have experienced credit difficulties. These lenders look beyond a simple credit score to assess the whole picture of your business and its potential.
At Mortgage & Finance Advisory, we work with businesses across Geelong, the Surf Coast, Melbourne and regional Victoria that have been knocked back by mainstream lenders. Our deep relationships with specialist financiers mean we can often find pathways to approval where others can’t.
Understanding what lenders consider “bad credit” helps you assess your situation and prepare the strongest possible application. Credit issues fall on a spectrum, and not all are viewed equally by lenders.
These are common and many lenders will still consider your application at close to standard rates. Minor issues include one or two late payments on utilities or phone bills, a small default (under $500) that has been paid, a slightly below-average credit score (500-600), credit enquiry activity from shopping around for finance, and short credit history due to being new to Australia or young in business.
These require specialist lender attention but are definitely manageable. Moderate issues include multiple paid defaults on your credit file, a credit score below 500, previous loan arrears that have been brought current, a past business failure while now trading under a new entity, and tax debt that is being repaid under an ATO payment arrangement.
These are more challenging but not impossible to work with. Serious issues include unpaid defaults or judgments currently listed on your credit file, previous bankruptcy (discharged), Part IX debt agreement (current or recent), current ATO debt with no payment arrangement, and multiple concurrent finance arrears. Even with serious credit issues, there are often pathways to approval, though the terms will typically reflect the higher risk involved.
Not all lenders assess credit the same way. Understanding the lender landscape helps you target the right financiers for your situation.
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| Lender Type | Credit Appetite | Typical Rate Premium | Best For |
|---|---|---|---|
| Major Banks | Clean credit only | N/A, will decline | Strong credit profiles only |
| Second-Tier Banks | Minor issues tolerated | +1-2% | Small paid defaults, limited history |
| Non-Bank Lenders | Moderate issues accepted | +2-4% | Multiple defaults, low credit score |
| Specialist Financiers | Serious issues considered | +4-6% | Bankruptcy, judgments, current defaults |
| Private Lenders | Case-by-case assessment | +5-8% | Complex situations, urgent needs |
While you can’t erase your credit history overnight, there are practical steps you can take right now to maximise your chances of approval and secure the best possible terms.
Lenders give a lot of weight to money on the table. A deposit of 20-30% (compared to the standard 0-10% for prime borrowers) dramatically reduces the lender’s risk exposure and demonstrates your commitment to the purchase. For some specialist lenders, a strong deposit can be the single most important factor in overcoming credit concerns. If you can put down 30% or more, you’ll likely find multiple lenders willing to work with you regardless of your credit history.
Lenders care most about your ability to make future repayments. If your business is currently trading well with strong, consistent revenue, this can significantly offset past credit issues. Prepare six months of business bank statements showing healthy turnover, regular deposits and manageable existing commitments. Many specialist lenders will place more weight on current cash flow strength than on historical credit events.
If you have unpaid defaults or judgments, pay them before applying if possible. A paid default is viewed much more favourably than an unpaid one. If you have an ATO debt, establishing a formal payment arrangement and demonstrating compliance shows lenders you’re actively managing your obligations. Even small steps like paying off a $300 phone default can make a meaningful difference to how your application is assessed.
Lenders appreciate context. If your credit issues resulted from a specific event (a business downturn, illness, relationship breakdown, the impact of COVID-19, or a problematic business partnership), explain this clearly in your application. A one-off event that you’ve recovered from is viewed very differently to an ongoing pattern of financial mismanagement. Your broker can help frame this explanation in a way that makes sense to lenders.
The equipment you’re purchasing matters. Essential business assets that directly generate revenue are viewed more favourably than discretionary purchases. A truck for a transport business, an excavator for a construction company, or a commercial oven for a bakery all make clear business sense. The asset itself serves as security, so lenders also prefer assets with strong resale markets and slow depreciation curves.
A Surf Coast concreting business came to us after being declined by two banks. The owner had a credit score of 420 due to defaults from a failed previous business venture three years earlier. His current business was thriving with $45,000 monthly turnover and he needed a $75,000 concrete pump to take on larger commercial jobs. We placed his application with a specialist lender, presented his strong current financials, explained the circumstances behind the defaults, and secured approval with a 25% deposit at 9.9% over 4 years. Monthly repayments of $1,420 were easily covered by his revenue, and the new pump allowed him to take on $15,000+ commercial pours he’d previously been turning away. Twelve months later, with a perfect repayment record, we refinanced him to 7.2%, saving him $145 per month.
The first step is understanding exactly where you stand. We’ll review your credit file, identify all listed events (defaults, enquiries, judgments), and assess the severity from a lender’s perspective. This gives us a clear picture of which lenders are likely to approve your application and at what terms.
Based on your credit assessment, business financials and the equipment you need, we develop a tailored strategy. This might involve addressing specific defaults before applying, structuring the deposit to optimise approval chances, selecting the right finance product, or identifying the most appropriate lenders for your specific credit profile.
We help you compile a comprehensive application package that presents your situation in the best possible light. This typically includes your last two years of tax returns and financials, six months of bank statements, a clear written explanation of credit events, evidence of current business performance, asset details and purchase documentation, and proof of deposit funds.
Rather than scattergun applications (which create additional credit enquiries and further damage your score), we strategically submit to one or two lenders we’ve identified as the best fit. Our established relationships with these lenders mean we can pre-discuss your application, address concerns upfront, and advocate for your approval with the credit team.
Once approved, settlement for bad credit equipment finance typically takes 48-72 hours. We manage the entire process through to settlement, ensuring all documentation is completed correctly and funds are disbursed to the seller promptly.
One of the often-overlooked benefits of bad credit equipment finance is its potential to rebuild your credit profile over time. Here’s how it works.
Positive repayment history is recorded. Every on-time payment you make is reported to credit bureaus, gradually building a positive credit history that offsets the negative events on your file. After 12-18 months of perfect repayments, many borrowers see meaningful improvements in their credit scores.
It demonstrates financial responsibility. Successfully managing a finance commitment shows future lenders that you can handle debt responsibly. This leads to better rates and terms on future finance applications, including potentially refinancing your current equipment loan at a lower rate.
Negative events expire over time. Most defaults remain on your credit file for five years, while bankruptcies show for up to seven years. As these events age and eventually drop off your file, combined with your positive repayment history from equipment finance, your credit profile improves significantly.
Refinancing opportunities emerge. After 12-24 months of consistent repayments, you may be eligible to refinance your equipment finance at a lower interest rate. This can save you thousands over the remaining term and is a tangible reward for your improved credit behaviour.
The bad credit lending space unfortunately attracts some operators who prey on vulnerable borrowers. Protect yourself by being aware of these warning signs.
Excessive upfront fees. While some establishment or brokerage fees are normal in the specialist lending space, be wary of anyone charging thousands of dollars upfront before they’ve even secured an approval. Legitimate brokers typically earn their commission from the lender upon settlement, not from you upfront.
Unrealistically high interest rates. Even with bad credit, you shouldn’t be paying more than 15-18% for secured equipment finance. If someone is quoting rates above this, they may be taking advantage of your situation. A qualified broker can benchmark what’s reasonable for your specific credit profile.
Pressure to act immediately. Legitimate lenders and brokers won’t pressure you into signing today or tell you the deal disappears tomorrow. Take time to understand the terms, compare where possible, and ensure the repayments are affordable within your business budget.
Lack of transparency. You should always know the total cost of your finance, including the interest rate, all fees, the total amount repayable, and any penalties for early repayment or late payment. If a lender or broker can’t clearly explain these costs, walk away.
Generally, no. You’ll need to wait until your bankruptcy is discharged before applying for equipment finance. However, once discharged, specialist lenders will consider your application, typically with a larger deposit requirement and higher interest rate. The timeframe since discharge and your trading history since then are key factors in the assessment.
Each finance application creates a credit enquiry on your file, which can temporarily impact your score. This is why it’s critical to work with a broker who can target the right lender first time rather than submitting multiple applications. A single targeted application has minimal impact, while five or six applications in a short period can significantly lower your score.
Rates vary significantly based on the severity of your credit issues, the deposit you can provide, and the asset being financed. As a general guide, minor credit issues might add 1-3% above prime rates, moderate issues 3-5% above prime, and serious issues 5-8% above prime. Your broker can give you a realistic expectation based on your specific situation before submitting any applications.
In Australia, defaults remain listed on your credit file for five years from the date of listing, regardless of whether they’ve been paid. Serious credit infringements (like fraud) can remain for seven years. Bankruptcies show on your file for either two years after the bankruptcy ends or five years after the bankruptcy start date, whichever is later.
You can finance both new and used equipment with bad credit. In some cases, new equipment may actually be easier to finance because it has a higher resale value and longer useful life, giving the lender more security. However, the lower purchase price of used equipment means lower repayments, which can be easier to demonstrate affordability for.
Not necessarily, though providing a guarantor can significantly strengthen your application and may help you access lower interest rates. If a director or family member with a strong credit profile is willing to guarantee the finance, it gives the lender additional security and can be the difference between approval and decline for borderline applications.
We specialise in finding equipment finance solutions for businesses with credit challenges. Free, confidential assessment with no obligation.
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About the Author
Melanie McNaughton is the founder of Mortgage & Finance Advisory, based in Geelong, Victoria. With extensive experience in non-conforming and specialist lending, Melanie helps businesses across Geelong, the Surf Coast, Melbourne and regional Victoria access equipment finance solutions, including those who’ve been declined elsewhere. Contact Melanie on 03 9020 2699 for a free, confidential assessment of your equipment finance options.
