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You’re probably already aware that companies have credit files too. So how do you get the most competitive loan rate available to you if your business or personal credit record has taken a few knocks along the way?
Much like consumer lending, business lending is getting better at catering to “non-standard” (read “bad credit”) borrowers. In days on gone by, if your bank said “no”, that might have been the end of the line. Thankfully, these days there are plenty of innovative specialist lenders around. These lenders use smarter approval algorithms and underwriting processes, which let them access previously untapped sectors of the market, without having to lend irresponsibly.
Both, but which is more significant can depend on the type of company the loan is for.
Ultimately, each lender has it’s own approval systems and lending criteria, and they can even vary over time.
One lender might want you and your firm to tick all the boxes. Another lender might be happy to lend to somebody with bad personal credit, if it can see that their company is clearly moving in the right direction, for example.
Individuals and companies don’t have one single, definitive credit score. Different credit reference agencies (CRAs) – the firms that track and report borrowing behaviours – use different scoring systems. However, if you have bad credit in one CRA’s eyes, there’s a strong likelihood you’ll have bad credit in all CRAs’ eyes.
“Bad” credit can come about through late repayments on credit agreements, or simply through not having much of a track record of using credit products.
A credit score is just one of a number of factors that lenders look at when they’re weighing up whether or not to approve an application. In fact, what’s probably more important is how affordable the loan would be for your business, taking into account its past, present and projected income and outgoings.
With good credit, provided you meet their various criteria, most lenders will be delighted to lend you money. With bad credit, some won’t.
Here are some steps you could take to boost your chances of getting your application across the line:
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