Business Finance And Adverse Credit History | Commercial ...

Despite the announced end to recession and the beginning of a new business year; entrepreneurs everywhere are still struggling to receive the business lending required to cement their commercial success. Whether to assist with debt relief, enable commercial development or to kick start a new project; there is no doubt that a commercial property mortgage, bridging finance, buy to let mortgage, development finance and even invoice financing is the key to success but what of the potential application hurdles?

Whatever finance option and whatever the needs of the business; the previous year made evident that banks and high street lenders are less inclined to support those with adverse credit history and struggling business accounts but is all lost?

Adverse credit can refer to a number of issues however; anything that may affect the loan capability of a borrower will all be dependent upon the lender and the lending criteria that are in place.

Common credit issues that may be analysed during a commercial loan application can include the following:

• Personal Finance History- Dependent upon the type of finance that is requested; lenders may analyse the personal credit history of the business owner. Does the business owner have a steady personal cash flow? Does the business owner have a personal home mortgage and are all repayments being made according to the agreed schedule? What about any other financial agreements including credit cards or any other form of heavy financial loan? The personal finance history of a business owner can greatly affect the proficiency of commercial borrowing and may even be a reflection on money management skills.
• Business Accounts- Whether a buy to let mortgage agreement or leasehold finance; it is a must for all lenders to analyse the business accounts, if and where possible. Analysing every step of the business finance history, including any large costs, invoices and any other monetary demands, lenders will analyse the competence of a business as a borrower and determine whether projections can be met and the business itself can withstand any coming strains. Understanding the business accounts will allow a lender to determine the financial ability of a business and determine whether or not a commercial loan will be a risk.
• Cash Flow- Tying in with business accounts; lenders will also take the time to analyse the cash flow of the business. By understanding the monthly incomings and out goings, extra costs, employee wages and so forth in an effort to determine whether monthly loan repayments can be comfortably met.

Upon analysing the credit history of the business and business owner, lenders will use standard commercial ratios to determine the risk level of a business. The loan to value ratio and the debt service coverage ratio are the two most common commercial methods in which the risk level and in return the capacity of a borrower is determined.

Loan to Value Ratio- This is a key risk factor for borrowers of either a HMO mortgage, a buy to let mortgage or a commercial mortgage and will determine what value of the loan can be comfortably lent without the risk of default.

Debt Service Coverage Ratio- Another key risk factor, the DSCR will determine the amount of cash flow within a business that may comfortably cover any debt and interest payments. This is somewhat of a protective barrier that may minimise the risk of loan default.

Although many banks and high street lenders are continuing to remain restricted on all areas of business finance, a commercial mortgage broker is now a clearer and more viable option for those with an adverse credit history. Whether problems maintaining personal finance repayment on credit cards, a residential mortgage or any other loan or perhaps if there stands previous, failed commercial finance experience; the odds of being accepted as a viable and trusted borrower by the nations long running banks still stands very slim. However, whatever the credit rating and history; there are a range of commercial mortgage brokers who pride themselves on assisting all loan applicants with their needs.

Whether previously bankrupt or currently struggling; a commercial mortgage broker will take the time to analyse your current situation and work according to the above points to determine your capability as a borrower and to source the ideal finance option.

Despite the continuing struggle the economy may be facing; business finance is still an option for all businesses, whatever the credit history. ?

Why not contact a specialist commercial finance broker today to discuss the options available to you and your business??

Source: http://www.charlestonfinancial.co.uk/business-finance-and-adverse-credit-history/

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