Confidential Advice Line: 0800 063 9221

Obtaining company finance – is business credit based on personal credit?

Financial institutions base their lending decisions on the level of risk posed by a borrower. In reaching a decision, various factors are taken into account, including the industry in which you operate, your history of repayment, and the information held in your business credit file.

Although this information is fairly comprehensive, the lender may decide to protect themselves further by looking at your personal credit record.

What details are included in a credit file, and what is the source of this information?

Your business credit record contains information on the company’s directors, and how ownership of the business is divided. If the company has borrowed in the past, it will also show payment defaults and County Court Judgements (CCJs) against the company, as held by the Registry Trust.

A lender will be able to see other lines of credit taken out by the business, and the total amount of credit available. Companies House also provides information to the credit reference agencies on your company accounts.

Other ways in which information is gathered

Some agencies gather information via questionnaires, or by calling businesses directly. This supplements the official data obtained from Companies House and the Registry Trust.

If you feel there are insufficient facts and figures in your company’s credit file – if you are a start-up business, for example – you can potentially boost your credit rating a little by providing the credit reference agencies with generic information, such as the number of people you employ, or your line of business.

Building up a good business credit rating

It can be particularly difficult for new companies to obtain borrowing, as there is no history of repayment that a lender can use as a basis for its decision. One answer to this problem, and also for more established businesses that have not borrowed before, is to start a line of credit that can be easily repaid each month.

This might be an ongoing order for office supplies, for example, but essentially it must be a regular, affordable payment that will not be missed. But even if you improve your business credit score, can your personal credit rating let you down in relation to company borrowing?

Scoring system to establish creditworthiness

It is possible that a poor personal credit history could affect your company’s ability to borrow money. The way in which you conduct your personal financial affairs is not necessarily a reliable reflection of how you would deal with company finances, but if a lender sees no information of value in your business credit file, they may turn to your personal credit history to guide their decision.

Some financial institutions use specific software that incorporates both business and personal credit records when scoring an application for borrowing. This provides them with an integrated set of information that allows them to more accurately estimate their risk.

Credit checks for business borrowing

There are two types of credit check for both business and personal borrowing – a hard enquiry and a soft enquiry. A soft enquiry can be carried out by a third party without your permission, and does not affect your credit score.

A hard enquiry must be authorised - usually via an official application for borrowing or credit. If a hard enquiry takes place, and the borrowing is subsequently refused, this can negatively affect your credit score.

Begbies Traynor is the UK’s leading professional services consultancy. If you need advice on how your personal credit score might affect your company’s ability to borrow, call our expert team to arrange a free initial consultation. We operate from 46 offices nationwide, and offer a same-day meeting with one of our licensed insolvency practitioners.

53 Regional UK Offices

Find your local Begbies Traynor office and speak to an adviser today.

Find your Local Office
0800 063 9221

Call our Confidential Advice Line. Calls to this number are free of charge.

Call us now...
Request a Meeting

We invite you to come and discuss your enquiry with us at your convenience.

Request a meeting...
0800 464 0871

Call our Confidential Advice Line. Calls to this number are free of charge.

Call us now...
Request a Meeting

We invite you to come and discuss your enquiry with us at your convenience.

Request a meeting...
0161 837 1700

Call our Confidential Advice Line. Calls to this number are free of charge.

Call us now...
Request a Meeting

We invite you to come and discuss your enquiry with us at your convenience.

Request a meeting...
Gin festivals cancelled as organiser placed into administration
Begbies Traynor appointed as administrators of Gin Festival Limited
20 festivals planned for the coming months have been cancelled
Read More →
 
Join thousands of professionals by signing up for our updates
Analysis and Opinion from our Partners
Top Industry News
Register Now →
 

Advice you can trust

We are accredited by the following industry leading organisations

Insolvency Practitioners Association Institute of Chartered Accountants in England and Wales R3: Association of Business Recovery Professionals ICAEW Business Advice Service Turnaround Management Association ACCA (the Association of Chartered Certified Accountants) ICAS | The Institute of Chartered Accountants of Scotland

Contact the Begbies Traynor team

or Find your Nearest Office

Here at Begbies Traynor Group we take your privacy seriously and will only use your personal information to contact you with regards to your enquiry. We will not use your information for marketing purposes. See PRIVACY POLICY

Processing...