Published in Retail Newsagent Magazine, Nov, 2015 |
I am often asked to advise retailers on the best way to fund store development projects and my advice is always based upon each person’s individual circumstances.
The cost of any finance will vary greatly, from money that is secured on a property to that where the shopfittings themselves are used as security. This can depend on how long someone has owned a business and whether they own any freehold property, but by far and away the most important factor in the cost of finance, and indeed whether a proposal is accepted or declined, is the information discovered when a credit search is carried out on any individual and also the business itself.
It is important to be aware, therefore, of what a credit search will reveal and what should be done if you are aware of any issues that might affect your ability to get any type of finance.
Credit searches tell funders a great deal about previous payment history and contain a lot of detail that is critical in making an underwriting decision.
The information is tied to the name and date of birth, but also the address. It will confirm how long somebody has lived at their address and will also show any information linked to other previous addresses. Most types of finance arrangements will show up and there will be a detailed payment history going back several years that gives funders an idea of a person’s habits and what types of or how much finance they have. Having no finance can be as much of a hindrance as having too much, because finance providers want to see payments being made on time. If a person has no finance at all, or very little, a payment pattern can’t be identified, which can be an issue.
For many people, credit searches don’t cause any issues and they may not even be aware what has been revealed. Others, though, will have had issues in the past that might have adversely affected their credit rating. They may or may not be aware of this, or they may be unsure what to do about it.
When I am advising customers about raising finance, the issue that causes the most problems is adverse credit that is historic and hasn’t been dealt with.
Finance companies accept that circumstances can change and situations like redundancy and bereavement can cause financial hardship. Also, businesses can have financial disputes with suppliers, that albeit temporarily, do affect ability to pay.
What they like to see if this does occur, however, is a swift response once circumstances have changed for the better and that any adverse credit indicators such as defaults or county court judgments have been satisfied as quickly as possible. Adverse credit information that hasn’t been dealt with is very likely to result in the rejection of an application and the larger the amount and the longer it goes without being satisfied, the more the damage done to a person’s credit rating.
So what can you do if circumstances do change and somebody ends up with adverse credit registered against their name? The first thing to do is to deal with the problem as soon as personal circumstances will allow and not to bury their heads in the sand. Find out what the problem is and who it is registered by. Or, if that is already known, contact the parties involved and tell them you want to settle the matter. Keep a note of all conversations you have and keep any correspondence relating to the matter. Once you have settled the dispute, the credit reference agencies can be informed. Write a note of exactly what happened and why your circumstances changed and keep that together with any correspondence. When you begin applying for finance, funders will often only approve applications for people with historical adverse credit information to hand.
- Check your own credit file regularly, particularly before making any finance application
- If you become aware of any adverse credit information, don’t bury your head in the sand. Deal with any adverse information as soon as possible
- Keep copies of phone conversations and correspondence relating to the matter
- Be honest about any adverse credit you know about when making any new applications
- Remember, the longer it goes without being satisfied, the more it will affect you.