Finding it hard to get a loan for your business? You’re not alone: This is a problem that many people face. You just have to be aware of what is available to you and how you can secure extra funds.
Your Credit History
Virtually all lenders will look at your credit history. This is a routine check to ensure that the money they lend will be repaid and that you can afford it. If you have missed payments in the past, on a mortgage, loan, rent, etc., then lenders may refuse your application. Also, if you have outstanding debt and have a low or no income, this can also go against you.
Different creditors use different point-scoring systems and have different thresholds, so it is important that you ask how you scored and check that they have all the correct information. Also, you have the right to ask them which credit reference agency they used to obtain their information about you. It may be that some of the information is incorrect, or not a complete picture. By amending your credit file, you can improve your credit history and boost your scores.
Credit Scoring
This is a process that creditors/lenders use to enable them to decide if they can take the risk of lending you money. Your application for a loan will tell the lender how much money you have incoming, what your outgoings are, and if you have enough to repay a loan. It will also tell them about outstanding debts. The application form is a way of crediting you with points. The more points you have, the higher your credit rating will be. If you have a low score, and each company will have a threshold that acts as a cut-off point, it means that they will either refuse a loan or charge you more to borrow the money.
The Lenders
If you apply for a loan, lenders will check your credit history. Obviously, this is because they need to ensure that they will get their money back. Unfortunately, if you have a poor credit rating you will invariably end up paying higher interest rates than those with a good credit rating. This will mean longer and higher monthly payments, but it could be your opportunity to ease your financial situation in the long term, and if you keep up the payments regularly, it will help to boost your credit rating for the future.
If you’re not sure you will qualify for a standard loan, it’s worth talking to a specialist broker. Business loan broker services in Melbourne, Australia, for example, have a number of innovative solutions for clients, which could help you to secure business finance when other lenders have said “no”.
Once you know your options, consider which avenue is best for the business in the long-term. Interest payments will be higher if your credit score is lower than average, so factor this into your cash flow projections. Don’t borrow money you can’t afford, or it could jeopardise your credit rating even further.
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