Getting past credit
OK you’ve now made the big decision to replace that old plotter printer and have found the perfect machine to replace it with. The next task is to get financing, if you haven’t applied for any credit lately you will no doubt find that lending criteria has gotten a lot tougher so in this months article I will try to give you some tips on getting that credit application approved.
1. Prior to completing a credit application decide on what type of financing facility, you want and what lender is best suited to your situation then get pricing agreed. This is important if you complete a credit application which may get approved then decide not to proceed with the pricing or the lender, then fill out another application a short time later the analyst will probably assume you were declined in the earlier application which will not help your case.
2. Complete the credit application thoroughly. As you will probably be guaranteeing the lease personally there is no benefit to not disclosing assets that will strengthen your application. Make sure your accounts are up to date, and prepare cash flow projections for the next twelve months. Although this may not be a requirement it will strengthen your application and demonstrate your ability to service the debt. The two key things a credit officer is looking for are asset coverage and serviceability. Asset coverage is assessed by looking at the value of owned assets would have if they had to be sold off in the event the business was no longer a going concern. Serviceability is an assessment of available cash generated by the business on a monthly basis which is not required to meet existing obligations.
3. As natural as it is, people have a tendency to try and omit or hide past or current issue with current or past credit providers. Once you sign the authority to do credit searches chances are the credit analyst will find it. Additionally credit people review accounts and submissions all day every day and they are pretty good on picking up irregularities. The best policy is to disclose any issues up front and highlight points that you believe justify your situation. For example you may have received faulty goods from a supplier who you are now in dispute with and they have initiated a credit default against you. This does not mean your application will be declined. It is much better to make a few notes on the application as to your side of the story and clearly detail what is being done to resolve the situation.
4. “Talk up your business” in a covering letter or email highlight any recent or expected positive development around your business. For example if you have just won a new contract to print posters for a large entertainment company! Or simply point out something like: you will soon be celebrating your tenth year in business.
5. And of course consult with your accountant and or financial broker for advice, good luck and remember to read the fine print .
True Lease Pty Ltd