Numerous factors affect the credit score of your business so it’s important to understand these and take action where possible to improve your rating.

Here are the key indicators to look out for:

Credit History

If you have borrowed in the past then information on the way your account was conducted would have been shared between the banks and finance institutions.  Using a system called Delphi the lenders will all have a record of how much you borrowed, how much of it has been repaid and whether or not it was repaid on time.  This will include credit cards and any other form or credit agreement.

Indebtedness

Any potential lender will also use Delphi to look at the amount of credit you already have to ensure that your business is strong enough to service any outstanding loans as well as the advance you have applied for.

Adverse History

The date, size and nature of any court judgements or outstanding arrears in relation to the overall size of your business will generally dictate whether or not they represent a major hurdle for your credit application.  Even companies like Tesco have CCJs but still have a more than substantial credit limit.

Less well established businesses and those with weak accounts are however likely to find that any CCJs will make their application fail.  We recommend that you declare any adverse history at the outset so a full explanation can be included in your application.

Trading History

If you have been trading for less than three years then you will find it more difficult (but not necessarily impossible) to get credit than if you were a well established business.  It’s worth taking this into account if you are thinking of applying for credit and making sure that other key factors such as your profitability, net worth and the credit worthiness of directors are all made as strong as possible to compensate.

Business Accounts

The profitability and net worth of your business are two key factors in the underwriting process.

Taking the balance sheet first, for most types of finance you will need a net worth at least equal to the size of advance.  So if your business has a net worth of £10,000 (tangible assets of £50K, liabilities of £30K and intangible assets of £10K) it is unlikely you will be advanced £100,000 to buy a new piece of machinery or computer system without third party support.

Loss making companies will also find it tough in the current environment unless they have a significant net worth or have the support of a strong parent company or director.

Director’s Credit Score

If you have a limited company, then it is quite normal for a credit check to be carried out on the directors of the business as well as the business its self.  The logic being that directors with a good credit score will often run good creditworthy businesses.

Although this is an important factor, the credit covenant of the business itself will be more critical but in marginal cases a good credit report for the directors could make the difference.

Type of Asset to Finance

Some items are easier to finance than others.  Cars and vans for instance, because of their relatively strong residual values, can often be financed for young or financially weak businesses.  At the other end of the scale, arranging finance to buy or lease computer software or specialist equipment is generally much more difficult.

Number of Credit Applications

Before applying for credit make sure that you are happy with all of the terms and conditions and get some advice as to the chances of it being approved.  Multiple credit searches will count against your credit score so avoid them if you can.

On-line credit applications should be avoided until you have discussed the matter in full with the lender and fully understand what you are applying for and how much they will charge if the application is successful.

How you can help yourself

There are a number of things you can do to give your business the best chance of getting credit.  The first is to find out its credit rating as well as your own.

Business ratings are available from a number of sources including companies like Dun & Bradstreet or Riskdisc.  Personal credit ratings can be checked through the credit rating agency Experian by visiting www.creditexpert.co.uk .

If you see something you don’t agree with that is adversely affecting your rating then take it up with the finance company or bank in question.  And don’t overlook factors such as being on the electoral register or paying off credit card bills on time.

Don’t be tempted to take all of your profit out of the business.  If you build your balance sheet up over a period of time then not only will you have the financial strength to weather any economic downturn but your business will be much more attractive to potential lenders.

In some cases your finance application will be assessed by a computer using a points system so anything you do to increase the credit rating will improve your chances of success.

Choosing a Lender

Gone are the days when the banks were willing to underwrite all of your business.  Likewise the approach taken by most finance companies is now much more conservative and credit limits are generally lower.

We recommend that you don’t put all of your eggs in one basket but op for different lenders according to your specific needs.  For example, if you have a business account and overdraught with your clearing bank then it might be prudent not to use their subsidiary company for your vehicle leasing or commercial mortgage.

If you put all of your borrowing with one bank then you might come up against group company limits just at the time when you need their support most.  And if your plans are for a series of acquisitions throughout the year, then try and match these with the most appropriate lender.

Why Choose TeleLease

The benefits of using a commercial finance broker such as TeleLease are considerable.

Starting with you and your business, we will work hard to understand your finances and advise on how best to prepare your application so that there is every chance of securing the finance you need.

We have strong working relationships with a number of different finance companies so can direct your application towards the most appropriate source with the best chance of success.

You will enjoy a one to one relationship with a dedicated account director who will co-ordinate your applications and take full responsibility for delivering the level of service you need.

And there will be no foreign call centres, premium rate numbers or automated switchboards – promise.

If you would like to discuss your asset finance requirements with someone that knows the market then please call us today on 01908 516300 or email info@telelease.com

For further information please call Mike Shaw at TeleLease on 01908 516300 or email mike.shaw@telelease.com

Changes from 2010-11
The lower threshold (the CO2 emissions figure which sets the 15 per cent rate) is reduced from 135 to 130 g/km.

The appropriate percentage for cars powered solely by electricity is reduced to 0 per cent for five years.

Changes from 2011-12
The car benefit rules will be significantly simplified from 2011-12. From 6 April 2011:

There will no longer be any reductions for alternative fuels (hybrids, bi-fuels and cars manufactured to run on E85 – types H, B and G).

The diesel surcharge will apply to all diesels (including type L diesels approved to Euro IV emissions limits and first registered before 1 January 2006).

Electric cars will still have an appropriate percentage of 9 per cent, but this will be given directly in primary legislation. The temporary reduction to 0 per cent until 2014-15 will continue to be given by secondary legislation.

The £80,000 limit for the price of a car for car benefit purposes will no longer apply.

The lower threshold (the CO2 emissions figure which sets the 15 per cent rate) will be reduced from 130 to 125 g/km.

The number of letters used to describe cars will therefore be reduced to three: E for electric-only cars (as at present), D for all diesels (current types D and L) and A for all other types (current types H, B, C, G, P).

Changes from 2012-13
The special rules for QUALECs (qualifying low emissions cars, those with CO2 emissions not exceeding exactly 120 g/km) will be abolished.

The lowest appropriate percentage will still be 10 per cent, but will apply to cars with CO2 emissions of up to 99 g/km. The rate for emissions of 100 g/km will be 11 per cent and will increase by 1 per cent for every 5 g/km to the current maximum of 35 per cent, as at present.

Changes from 2015-16
The appropriate percentage for cars powered solely by electricity reverts to 9 per cent unless this figure is changed in any future announcement.

Most high street banks have reduced the amount that they are prepared to lend to any one client and now take a much closer look at their group position.  If for example you need a loan to finance some new machinery but happen to have some cars on a lease agreement with their in-house contract hire company then you could well find your application blocked.

Businesses that have suffered through the recession may find that they can no longer meet the lending criteria demanded by their own bank, yet still be credit worthy and a reasonable risk to other lenders.

Using a commercial finance broker like TeleLease could solve the problem by providing:

• Established relationships with different lenders
• Good advice in terms of targeting your borrowing according to the type of asset you need to finance
• Totally independent from your bank

It costs nothing to get some good friendly advice.  So if you need commercial finance to purchase or lease assets or equipment for your business then contact us today on 01908 516300 or visit www.telelease.com

The BVRLA Guide to Driving at Work has just been fully reviewed and updated and is intended to be used as a tool in the general management of health and safety within the workplace and should be read by everyone who is involved with driving on business. The Guide offers advice that will be helpful in putting together company policy on corporate social responsibility in terms of driving at work, a policy which should be robust, demonstrable and auditable to show that an employer has taken all reasonable steps to protect their employee’s and other road users

For a copy of the guide call Mike Shaw of Telelease on 01908 516300 or 07775 925925.