Your business credit score is one of the most critical factors lenders consider when evaluating equipment finance, asset loans, and chattel mortgage applications. A strong credit profile can be the difference between securing competitive rates for your business equipment or facing declined applications.
Understanding Australian Business Credit Scores
In Australia, business credit scores typically range on a scale of 0–1,000 or 0–1,200, depending on the reporting agency (e.g., Equifax uses a 0–1,200 scale). Higher scores indicate lower credit risk. While exact bandings vary between bureaus and lenders, a general guide for 2026 is:
- **Below 400-500:** Often considered poor or higher risk, potentially leading to stricter terms or rejections.
- **400-600:** Average or acceptable. Many lenders have internal minimum score thresholds in approximately the 450-600 band for business or director credit.
- **600-800:** Good or very good, indicating a solid credit profile.
- **800+ (up to 1,000 or 1,200):** Excellent, signifying very low risk and access to the most competitive finance options.
It’s important to remember that these are indicative bands, and each lender interprets scores differently. While a strong score doesn’t guarantee approval, it significantly improves your chances for cheaper, more flexible equipment finance. Alternative or non-bank lenders may work with lower scores but typically offset this risk with higher rates, more security, or lower loan amounts.
Why Your Business Credit Score Matters for Asset Finance
When you apply for equipment finance, machinery loans, or chattel mortgages, lenders assess both your personal and business credit history to determine your creditworthiness. A higher score signals financial reliability, which typically results in:
- Better interest rates - Save thousands on equipment finance over the loan term
- Higher borrowing capacity - Qualify for the full equipment cost you need
- Faster approvals - Streamlined application process for urgent equipment purchases
- More flexible terms - Access to balloon payments, lower deposits, and extended terms
- Better lender options - Qualify for competitive asset finance from major lenders
A poor credit score can mean higher rates, stricter conditions, or outright rejection—even for essential business equipment.
Beyond the numerical score, lenders also conduct a holistic assessment of your business. This includes evaluating your cash flow and serviceability (ability to afford repayments), time in business and trading history, the type, age, and resale value of the asset being financed, and the security offered. A strong overall business profile can sometimes help to offset an only-average credit score, and vice-versa, making a comprehensive application crucial.
Understanding Business Credit vs Personal Credit
While personal credit affects home loans and personal finance, business credit specifically impacts:
- Equipment finance and machinery loans
- Asset finance and chattel mortgages
- Business lines of credit
- Commercial vehicle finance
- Trade finance and invoice finance
Most asset finance lenders assess both your personal credit (as a director or guarantor) and your business trading history.
5 Strategies to Strengthen Your Credit for Equipment Finance
1. Pay All Business Accounts on Time, Every Time
Payment history is the single most important factor in credit scoring. Late payments on business loans, trade accounts, or even utility bills can damage your credit profile for years.
Action Steps:
- Set up automatic payments for all business loan repayments and recurring bills
- Pay supplier invoices within terms to build positive trade credit history
- If cash flow is tight, communicate with creditors before missing payments
- Consider invoice finance or debtor finance to smooth payment timing
Equipment Finance Impact: Lenders review your payment history on existing business debts. A pattern of late payments, even if eventually paid, signals higher risk and can result in declined applications or premium interest rates.
2. Maintain Low Credit Utilization Across Business Accounts
Keep your business credit card balances and business overdraft usage modest, typically aiming for under 30% of available limits. Lower utilization (under 10%) is often viewed even more favourably by credit bureaus.
Example: If your business has a $50,000 business credit card limit, aim to keep the balance below $15,000 (ideally under $5,000).
Why This Matters for Asset Finance: High credit utilization can signal potential cash flow problems, making lenders nervous about adding more debt through equipment finance. While the “30% rule” is a common consumer-credit guideline, for businesses, it serves as a practical indicator that you have sufficient financial headroom and can comfortably manage existing commitments before taking on a new chattel mortgage or asset loan.
3. Build Business Trading History with Your ABN
The longer your ABN has been active with positive trading history, the stronger your business credit profile. This is especially important for self-employed business owners and sole traders.
Action Steps:
- Maintain at least 2 years of solid trading history for best rates
- Keep consistent business income reporting through BAS statements
- Avoid frequent ABN changes or business structure changes
- Build relationships with regular suppliers who report payment history
New Business Tip: If you’re a startup or have less than 2 years trading history, focus on strengthening your personal credit score, as lenders will rely more heavily on personal guarantees for equipment finance.
Equipment Finance Impact: A longer, consistent trading history demonstrates stability and reduced risk, which can lead to better financing terms and lower deposit requirements for equipment finance.
4. Limit Hard Credit Inquiries for Business Finance
Every equipment finance application creates a “hard inquiry” on your credit file, which can temporarily lower your score. Multiple applications in a short period signal desperation to lenders.
Smart Application Strategy:
- Use a finance broker who can pre-qualify you without hard inquiries
- Apply for equipment finance only when you’re ready to proceed
- Bundle multiple equipment purchases into one application if possible
- Space out major finance applications by at least 3-6 months when feasible
Exception: Shopping for asset finance rates within a 14-30 day window is typically treated as a single inquiry, so getting multiple quotes in this timeframe won’t hurt your score significantly.
Equipment Finance Impact: Frequent hard inquiries can be interpreted as a sign of financial distress, potentially leading lenders to view your business as a higher risk for equipment finance and offer less favourable terms.
5. Check and Correct Your Business Credit File
Errors on business or personal credit reports are surprisingly common and can unfairly damage your equipment finance applications. Regularly review your reports and dispute inaccuracies immediately, before applying for finance.
Why to Check Your Report:
- **Identify and correct errors:** Find outdated defaults, duplicated entries, or incorrect personal/director details.
- **Proactive management:** Address issues before lenders see them, preventing potential delays or rejections.
- **Understand your standing:** Gain insight into how lenders perceive your business's financial health.
How to Check in Australia: Credit information for businesses is held by major Australian agencies such as Equifax, illion, and Experian. You can typically access your business credit report directly from these agencies (often via paid services) or through your finance broker or accountant. As a director or guarantor, you are also entitled to a free copy of your personal credit report from these agencies at least every three months.
What to Look For:
- Paid debts still showing as outstanding or active.
- Incorrect default listings or court judgments that have been satisfied.
- Debts from closed businesses still appearing.
- Misallocated late payments or incorrect director details.
- Accounts that are not yours (signs of identity theft).
Equipment Finance Impact: A clean and accurate credit file ensures lenders assess your business based on correct information, improving your chances for competitive rates and smoother approval for equipment finance.
Additional Factors That Impact Equipment Finance Approval
Beyond credit score, lenders assess a comprehensive range of factors to determine your eligibility and terms for equipment finance:
- **Business cash flow and serviceability** - Can your business comfortably afford repayments from its operating income? This is a primary driver of approval.
- **Time in business and trading history** - Lenders prefer established businesses with a consistent track record.
- **Asset type, age, and resale value** - The equipment itself acts as security. Specialized or older equipment may require higher deposits or have stricter conditions due to lower resale value.
- **Security offered** - This includes deposits and any other assets offered to secure the loan, which will often involve PPSR registrations over the financed equipment.
- **Financial statements** - For larger exposures, detailed financial statements are crucial for assessing profitability and stability.
- **Public Records and Director Information** - Business credit files often incorporate public records such as ASIC and court information (e.g., judgments, external administration), as well as PPSR registrations over business assets. Director-level events (e.g., bankruptcies or defaults by directors) can also significantly impact the business's perceived creditworthiness.
How Long Until Credit Score Improvements Help?
Short-term improvements (1-3 months):
- Paying down high credit card balances
- Correcting errors on credit reports
- Paying overdue accounts
Medium-term improvements (3-6 months):
- Establishing consistent payment patterns
- Reducing credit inquiries
- Building positive trade credit history
Long-term credit building (6-12+ months):
- Lengthening business trading history
- Successfully completing business loan terms
- Building substantial positive payment history
Ready to Apply for Equipment Finance?
Once you’ve strengthened your business credit profile, you’ll be well-positioned to secure competitive rates for equipment finance, chattel mortgages, and asset loans. Whether you need construction equipment, medical equipment, commercial vehicles, or manufacturing machinery, a strong credit score opens doors to better financing options.
It’s important to remember that responsible lending obligations apply, and lenders will conduct their own detailed assessments. Always seek personalised financial advice tailored to your specific business circumstances.
The Loan Phone specializes in asset and business finance. We work with multiple lenders to find equipment finance solutions for businesses across Australia, including those with credit challenges.
We Can Help With:
- Equipment Finance - Machinery, construction equipment, medical equipment
- Chattel Mortgages - Tax-effective equipment finance for businesses
- Asset Finance - Commercial vehicles, trucks, and business assets
- Business Loans - Working capital and growth funding
- ABN Finance - Solutions for self-employed and sole traders
Contact us today to discuss your equipment finance needs and discover what rates you qualify for with your improved business credit score.
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