Equipment finance after a paid default

The situation

The following is an anonymised composite reflecting a recurring pattern, not a specific settled deal. A sole trader had a credit default recorded two years ago, arising from a disputed supplier invoice during a difficult trading period, which they subsequently paid out in full once the dispute was resolved. Now stable and growing, they need to finance a new piece of equipment to take on additional contracts.

Why it's hard

Many mainstream and bank lenders apply an automatic policy exclusion around any default within a set period, regardless of whether it has been paid or the circumstances behind it, which can shut out an otherwise strong application before an underwriter ever looks at the individual facts.

How it can be structured

A chattel mortgage or lease through a specialist fund or private lender comfortable assessing paid defaults on their individual merits is the standard path, secured by the equipment itself and assessed on current trading performance and the explanation behind the default rather than the default alone; the exit is ordinary loan servicing from the business's trading income. Providing a clear, documented explanation of the dispute and its resolution, alongside recent bank statements showing stable trading since, typically strengthens the file considerably and can improve the terms offered. Where the equipment is essential to fulfilling contracts already secured, presenting those contracts as evidence of forward revenue can also support the application beyond the historical financials alone.

Lenders in this space generally distinguish between a default that reflects a genuine, one-off dispute and a broader pattern of missed payments across several accounts, so providing supporting documentation, including correspondence with the supplier and confirmation the default has been recorded as paid, helps the file be read on its specific facts rather than as a simple credit score. A larger deposit than a clean-credit borrower might contribute is a common way to strengthen the application further, reducing the lender's exposure to the asset's resale value if the facility were ever to default. Where the business has since taken on additional trade references or supplier relationships that reflect positively on its conduct, including these in the application supports the broader picture that the earlier default was an isolated event rather than an ongoing pattern. Specialist funds active in this category will also often review the applicant's overall banking conduct over the most recent six to twelve months more closely than the historical file, since recent behaviour is the better predictor of how the new facility will be managed.

What it typically costs

Pricing reflects the credit history being accommodated, generally above the rate a clean-credit borrower would receive for the same asset, and is quoted on enquiry once a lender has reviewed the default, its resolution and current trading. Costs are otherwise standard for asset finance, with the equipment itself serving as security.

Timeline

1. Same day — scoping call confirming the default's details, resolution and current trading position.
2. 1–3 business days — document collection, including the default explanation and recent bank statements.
3. 3–7 business days — lender matching and submission to specialist funds comfortable with this profile.
4. 2–5 business days — approval and settlement.

Questions we'd ask you

1. What caused the original default, and can you provide documentation showing it has been paid in full?
2. How long ago was the default recorded, and has your credit file been clear since?
3. What does your trading position look like over the past six to twelve months?
4. Is the equipment tied to contracts you have already secured?
5. What deposit, if any, are you able to contribute toward the purchase?

Related

Asset & equipment finance · Impaired credit commercial loans · Impaired credit borrowers · Chattel mortgage