Credit Ratings – The Impact in Commercial Finance

Business owners often worry that their credit rating will make or break a finance application. The newer fintech financiers certainly rely more heavily on credit scores however for other financiers, it plays only a small role, particularly if you’re working with an experienced finance expert.

Will My Credit Rating Impact My Commercial Finance Options?

Generally, no. Unless there are significant past defaults, bankruptcies or anything else out of the ordinary, you generally shouldn’t be concerned about your credit rating impacting the finance you can achieve.

Below are some key points that provide more detail:

Past Enquiries – it is expected and accepted that many business owners will have significantly more credit enquiries on their credit file, as they are often financing the acquisition of new business assets. Most financiers apply common sense here, and if the credit enquiries can be explained, they don’t tend to have any impact on achieving finance approval.
Tell Your Story – if you’re using a trusted finance broker, ensure that they are telling the story of your business in the right way. Many financiers understand that sometimes there are things out of your control, such as COVID. Throughout COVID, many businesses deferred their finance repayments through those tougher months. Financiers understand this, only if they have the full story available.

Do Financiers Base the Interest Rate on My Credit Rating?

For Commercial Financing, the most important factor in determining your interest rate and finance structure is the financier we can access.

For Equipment Finance, the credit score alone doesn’t have a major impact on the interest rate, the rate is primarily based on the asset being financed and the profile of the business (e.g. age of the business, property ownership etc.)

For Working Capital Finance, similar to the above, once finance is approved, the rate is based upon the profile of the business, with very little regard for the credit score.

‘Low Doc’ Financiers

It is true that many of the ‘Low Doc’ Equipment Financiers on the market have policies in place which can exclude customers with lower credit ratings. The majority of financiers won’t consider an application from a business with a credit rating of less than approximately 500.

If your credit score is above 500 for example, and we have access to one of these ‘Low Doc’ Financiers, there is generally no difference in the interest rate if your credit score is 501, or 900.

Past Defaults – Can You Still Access Finance?

It is important to talk with your trusted finance broker about any past defaults or items to be concerned about. Make sure this is made clear upfront. If we know about the past, we can address it upfront which can make for a more effective application.

We have access to a range of experts who specialise in correcting and improving credit files. If you would like assistance in this area, please reach out and we’ll connect you with the right specialists.

We are here to support your business.

Please speak to us about all things finance. Whether it be Equipment and Automotive Finance, Working Capital Finance which includes Debtor and Trade Finance, Property Finance including Construction Finance, Insurance Premium Funding. And yes, we also do Home Loan Finance.

We know that banks are becoming more selective and treating business customers worse than ever – please make us your first point of contact every time – we will get you a better outcome with a far better experience.