Why Testing a New Equipment Finance Company with Declined Applications Is a Bad Strategy

Why Testing a New Equipment Finance Company with Declined Applications Is a Bad Strategy

The Problem with Decline Recycling

When evaluating a new equipment finance partner, many companies start by sending them the “bottom desk drawer” deals—the ones that have already been declined elsewhere. While it might feel like a low-risk way to test them, this method almost guarantees disappointment. These applications often carry significant weaknesses, so approval odds remain low, and even successful approvals rarely lead to funding. The result? An unfair and inaccurate measure of the lender’s true capabilities.

The Importance of a Representative Sample

The only way to truly assess a finance partner’s offering is to see how they perform across your full applicant spectrum:

• A-Credit: Prime customers where speed, technology, and competitive terms matter.
• B-Credit: Solid businesses with a few blemishes that still deserve reliable funding.
• C-Credit and Beyond: Challenging deals that require structure, collateral, or creativity.

By giving them a diverse mix of applications, you’ll get a complete picture of how they handle approvals, declines, and—importantly—the feedback loop.

Why Pilots and Partnerships Work Better

Instead of recycling declines, consider two more effective approaches:

• Unilateral Partnership: Give them a fair share of first-look applications. This lets you evaluate how they perform under normal business conditions.
• Pilot Programs with Tech-Forward Partners: If the lender has modern technology, a pilot integration allows you to see their process in real time, across all credit tiers.

Both strategies provide full transparency, allowing you to measure real performance, not just salvage potential.

Bottom Line

Testing a new finance company with only declined applications is like judging a surgeon based on terminal cases—it’s inherently unfair and unproductive. To properly evaluate a lender, you need a representative sample of applicants, a transparent feedback loop, and a partner who is willing to work across A, B, C, and beyond. That’s how you’ll know if they’re truly a fit for your customers and your business.