Credit Rating & Business Loan

WaxMechaniK

Hi all,


I'm about to launch my own business which doesn't require a massive startup loan although I will require a small-medium amount.

However, I'm concerned that I may not qualify for any business loans due to my credit rating. This is the only issue I can think of that may prevent getting accepted. The reason being, my credit rating has always been fine, and Ive never had any issues taking out agreements until a year or so after my mum asked for my name to be put down on her own business loan which did not succeed and that loan agreement is now in arrears. This has now brought my credit rating right down, everything else is spot on, including perfect store cards and credit cards.

I recently tried to get a credit card, but the only one I was accepted for was the lowest-end Capital One card.

So what I'm wondering is will this affect getting a business loan? And would it affect me applying for any grants or support?

My other question is, if this is a result of my credit rating, can anyone give me any advice to boost my rating with my mums business loan still there in arrears? (I can't remove my name from the loan and neither can I afford to pay it off for her, she's struggling at the moment).

Any advice and assistance is greatly appreciated, thanks in advance!


WaxMechaniK

chalkie99

If you put your name on her loan then it sounds like you either have a joint loan or you have acted as a guarantor. Either way, it's pretty much the same thing and is, effectively, your loan which you are now in default of.

Sounds like the lenders knew your mum was a bad risk and that is why they wanted someone else to bail her out when she failed. Unfortunately, she has now dragged you down with her.

Business loans are hard to get anyway and grants pretty much non-existent although you could try Business Link or look at your local authority website to see if they have any schemes.

Even with a perfect rating your bank would likely want you to put up 50% of the funds yourself and have security for the rest, together with a decent written business plan.

With an existing default I think a loan is pretty unlikely, sorry.

Moral of the story is to never be a guarantor for anyone, even family. Too may stories of failure on this board - see the sticky thread at the top of the page "Lending to friends and family".

WaxMechaniK

Hi there and thanks for replying.

Hmm it's a real shame that this could prevent me from starting a business for a very long time. I was ill-educated about business loans previously and although I feel like I wish I had not put my name down, I'm glad I helped my mum out as I would do anything for my mum!

I already have 2 grant options lined up, one offering 40% of costs and the other offering 50%. I was hoping to loan the rest, but it won't be a huge amount. I think if it wasn't for my credit rating, I wouldn't have a problem getting a loan. I have a detailed business plan too.

So is the ONLY solution, to build my credit rating back up, and in turn be able to have more chance of begin accepted for a loan, to have the arrears paid off?

bigadaj

WaxMechaniK wrote: »

Hi there and thanks for replying.

Hmm it's a real shame that this could prevent me from starting a business for a very long time. I was ill-educated about business loans previously and although I feel like I wish I had not put my name down, I'm glad I helped my mum out as I would do anything for my mum!

I already have 2 grant options lined up, one offering 40% of costs and the other offering 50%. I was hoping to loan the rest, but it won't be a huge amount. I think if it wasn't for my credit rating, I wouldn't have a problem getting a loan. I have a detailed business plan too.

So is the ONLY solution, to build my credit rating back up, and in
turn be able to have more chance of begin accepted for a loan, to have the arrears paid off?

No, you could always save up and ignore credit.

Tixy

WaxMechaniK wrote: »

So is the ONLY solution, to build my credit rating back up, and in turn be able to have more chance of begin accepted for a loan, to have the arrears paid off?

Even if the arrears are paid off the default will still show on your credit file for 6years from the date of the original default.

And you will still find it hard to get mainstream credit for the remainder of the 6years.

Joeler

Do you have copies of your credit reports?

What is the bad information on them? If you don't this should be your first priority. If you have maintained other forms of credit then this one bank loan that is in arrears is not the worst problem in the world.

Has the lender issued a default notice? Is this on your credit file?

How much are you looking to borrow and what is the money for? Just wondering if there are other ways around it?

Also if you mind the rest of your credit well, your own bank would be the best people to apply for a loan through. Also does it have to be a business loan? Personal loans are far easier to get. But they assume you have a steady job etc and are not planning a pioneering enterprise!

Dont give up because if you are certain you can make money from it, then throw everything you can at it until it happens.

Good luck