Poor Personal Credit
So, what happens if you have poor personal credit because of things which have happened in the past. Is this a deal breaker when applying for a business loan?
Previous credit difficulties will show on your credit file for a set period of time. Defaults from simple phone or utility bills will show. They will however elapse and therefore improve as time moves forward. A business loan provider will assess every loan application. When you have an average or below-average personal credit score, this makes up an overarching credit risk profile.
Therefore, it isn’t the end of the world if your credit isn’t great. It will make a proportion of the credit application; however, many different aspects are reviewed by the underwriting team. The trading history and assets of the business will be imperative to assessing a business loan amount and the affordability of repaying the loan, This is because all lending should be responsible.
How Do I Improve My Personal Credit?
Ways in which you can improve your personal credit can be as basic as ensuring you are registered on the electoral roll at the correct residential address. Also, if the credit file is showing something that is incorrect or being disputed, get this resolved before applying. Having a clear explanation of the reasons for any defaults along with evidence to demonstrate your argument is vitally important. It will allow us, the finance broker, to strengthen your business loan application. As previously mentioned, the personal credit of the directors or majority shareholders is one piece of a business loan application.
You can check your credit using this link here. This will cross-reference multiple credit agencies to pick up on any discrepancies.
Business Credit
As you may be already aware business credit from the outset is crucial when looking to raise finance. This could be asset finance on a vehicle, a business loan for cash flow, or a commercial mortgage on a property. Whatever the finance requirement a lender will be reviewing your businesses credit. Simple ways of keeping your business credit healthy can are staying out or within your overdraft, paying suppliers on time, and having good performing financial year-end accounts. Credit agencies will pick up on these factors and pull them together to make an overall score from 0 to 100.
It can work in your favor when winning new contracts, working with new suppliers, or taking on larger orders. Having a quick cursory check at a business’s credit will give you the power of deciding if they are credit-worthy. It could be the difference between you taking on bad debt or staying profitable.
Quick And Simple Ways to Improve Business Credit
- Check your businesses credit score regularly to ensure the information credit agencies hold is correct
- Personal financial scores will affect the business’s overall credit rating. Keep your personal finance under control.
- Should your business’s details change because you have moved offices ensure all registered and trading addresses are correct. This can take less than 10 minutes
- Don’t apply for business finance on an Adhoc basis. Use a commercial finance broker such as ourselves. We will only approach the most suitable lenders, reducing the number of credit searches
- Have good working relations with any creditors and pay invoices once they are due. Aged debt and slow payments can really hinder your credit score
Information Required When Applying for A Business Loan
Your business may be ready to apply for a business loan for business growth, cash-flow funding, or business acquisition. Whatever the reason you are probably now reading this because you are thinking about applying for a business loan and want to know more about the process.
It can be very straightforward if you are organised. Having the information accessible will reduce the decision-making time of the loan provider. If your business has a trading history then brilliant. If you are a new start most of the information will be similar You can contact a commercial finance broker to find out more.
- Most recent annual accounts
- Last 9 months business bank statements
- Business Plan
- Cash Flow Forecast
- Last 4 quarters VAT returns
- A clear requirement for funding and use of business loan
We can talk through the relevant information and why the lender requires this. Don’t panic if you don’t have all the above. We can work with you to tailor what works. The term of the loan and the rate will depend on your individual business funding requirement.
