The Business Bulletin
How do I get my business credit worthy? Cashflow is the lifeblood of any businesses, especially in the current post lockdown economy and while a majority of business owners are likely aware of the basic fundamentals of how their lending requests are assessed by lenders, it is likely that there are many factors which are still overlooked.
This article is designed to help a small
rent paid (if moving from a rented
business with ensuring their business
premises to a freehold) or even
a negative net worth or late filed
is in the best possible position when
pension contributions to a director
accounts as well as defaults and
applying for finance, whether it is a
(which can be put on hold if required).
even the sector which the business
small loan for an asset or a larger loan for a property:
While I would never expect a client to complete a full assessment of their
This includes late payments,
operates in. There are many websites which can
lending request, it certainly would
be used to check your business credit
Criteria A – Your business needs to be able to afford to repay the loan
help them present a case to a lender
history. I recommend that a business
if they were able to demonstrate that
owner subscribes to one of them to
their business could actually afford
ensure that the details are accurate
to repay the proposed loan. There is
and up to date.
This may sound obvious but isn’t
very little point in applying for finance
always the case. As a minimum,
if your business is loss making and
your business needs to be able
struggling to make their current
to demonstrate from produced
monthly commitments.
annual accounts and management information, that it can afford the
It’s also important to mention that, despite us focusing on business lending here, personal credit history is still of great importance. No matter how well run your business is, if a director has multiple CCJs in their
are ways to calculate the serviceability
Criteria B – Ensure your credit history is accurate and clean
of a loan repayment, the most
In an increasingly technology driven
cold feet. It can also cause great
annualised loan repayments. A good broker will know that there
common being EBITDA (earnings before interest, tax, drawings and amortisation). This enables a business to reduce their profits effectively while still ‘adding back’ figures to demonstrate that the business can
marketplace, the importance of credit history is growing and growing. While it may be obvious that County Court Judgements (CCJs) are likely to rule a client out from being accepted for
personal name (or even linked to their address in any way) this can lead to a lender very much getting embarrassment and strain to a business relationship if an adverse credit history is revealed when applying for finance. As with businesses, there are a
finance, other factors can also appear
number of monthly subscriptions
on a clients credit history which may
available for individuals to check
either lead to a declined decision or
changes to their credit history with a
may be added back to demonstrate
reduce the pool of lenders available
majority of lenders using Experian or
serviceability of a loan are current
to them.
Equifax which are affordable options.
afford the repayment required. Other lines on the accounts which
20 | Issue 17 – Finance
