Industry Insight
When one door closes… Exploring the options when funding is declined James Piper Founder & Managing Director Lightbulb Credit
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here are no two ways about it, being declined for funding hurts. Not just the applicant either, the broker also loses out on a potential deal. Ordinarily, those declines would end up in the bin and that would be the end of that customer interaction, but credit repair is aiming to change that. Improving a company credit score can have an immediate positive impact on funding applications. It can also make a significant difference to brokers in completing those difficult or more complex funding deals.
The COVID effect The pandemic has had a negative financial impact on many UK companies, with the resulting decline in revenue creating issues like reduced net worth, lower cash holding and deteriorating payment performance. All of these drag credit ratings down, reduce the chances of getting funding, and hurt businesses at a time when they need help the most. Alongside that, more credit checks are being run than ever before and lenders are also applying tighter criteria to their offers, making it even more challenging for businesses to get the support they need. Nearly all funding providers use a credit score in their decision making, creating a direct correlation between ratings, and borrowing. Meeting the minimum hurdle rating is a simple go/no-go decision for most applications, so it’s beneficial to be aware of a client’s score early on. Having a rating of over 45/100 should enable a funding transaction to take place but moving that nearer towards 100/100 will improve 42 | NACFB
the rates and terms offered by the lender, as the perceived risk is reduced in the funder scoring methodology.
Not all rating agencies are equal For brokers it’s useful to know that although there are six rating agencies in the UK, two have traditionally dominated the funding approval market. The key to gaining the best funding for a client is to focus on scores with these specific agencies and take direct action when needed to improve them. Brokers can add real value to their clients by sharing insight on the credit rating process and how it can impact their funding application before it is made. Brokers can benefit from credit repair as much as their clients. Turning a decline into a fundable deal maximises every opportunity, keeps that customer journey going and potentially paves the way for a more positive outcome. For clients, being offered a solution in a decline situation really enhances their experience, and they can also gain valuable insight into how their company is viewed externally. Recovery and growth are the primary objectives for many businesses this year and the lending market will be busier than ever as a result. Building credit repair into the funding process could make the biggest difference to the hardest hit and could help to unlock more deals for brokers overall.
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Turning a decline into a fundable deal maximises every opportunity, keeps that customer journey going and potentially paves the way for a more positive outcome
