So you’ve had a few credit issues in the past and you want to know how to borrow money for your business?
This is a really interesting topic and a question that is often more common than you think.
For the purpose of this post I’m going to lay commentary around borrowing to fund equipment for business purposes and my experiences so listen up.
Firstly there’s no black or white answer as to whether a bank will accept your credit blemish and allow you to borrow money for your business but in my experience these are 5 things that they will consider when deciding whether to allow you to borrow or not.
• The severity of the credit issue
I can already read the expression on your face.. ‘What?’ Yes, the severity. While there is no official grading system for credit issues, in the banks eyes there is certainly a big difference between a forgotten unpaid phone bill from when you moved house and an unpaid car loan that was eventually repossessed.
For example, a telco default is much easier to work with than a car loan default.
• Is the credit default paid? Or will it be paid?
Generally speaking, for a bank to consider your application they will require the credit default or court action to be finalised. When a credit issue has been paid the status will generally be updated as paid on your credit file.
• Available documentation from the credit issue
If it has been paid, make sure you keep evidence of this or if it is an ongoing dispute, make sure you keep emails from solicitors, etc. Basically as a rule of thumb, keeping any documentation that provides further evidence that the issue has been resolved is generally a good idea as we do sometimes find paid defaults are not always updated as paid on credit bureau reports.
• The story behind the credit issue
Ok ok hit me with it… don’t be embarrassed because I’ve heard a lot different situations so you’re certainly not alone. One thing I would recommend is to be honest, I’m not here to play judge or jury on your past but I will need to know how it happened to be able to explain it to the bank… and they will want to know!
If you weren’t aware of the credit issue before applying don’t be surprised as this can actually be very common with telco and electricity bills especially if you have moved house a few times.
• When the credit issue occurred
It’s not always the case, but generally speaking the older the paid credit issue the better. For example, it is far easier to explain an older issue from your past than a recent one, as a recent issue may raise more questions about your current position and your ability to service more debt. As with all credit issues, there are however always exceptions so don’t let any recent issues discourage you from applying.
In summary, the good news is that if you have a credit issue that you are not blacklisted from the face of the Earth… so breathe easy, there is plenty of grey area.
The best thing to do if you have a credit issue would be to give me a call on 0431 177 605 and we can have an initial confidential discussion about potential options available to you.