Being Ready for Finance Lenders Questions with Tina Clark
I have helped dozens of small business people get equipment financing. In some cases I get a call saying, I don't know if I will be obtain finance but after a 5 minute telephone interview, I can usually tell if I will be able to help you.
As credit criteria tighten up and finance companies are reluctant to lend money, I thought I would give you an idea of how to obtain financing for a business loan, home loan or even a new car.
Some of the first questions I ask you are:
1. Are you a home owner? Yes, then we can continue, no then how long have you been renting, and how much are you paying. Finance companies are looking for stability, so if you are renting and have been at your address for a while this is a good thing; we will also get a reference from your landlord.
2. How long have you been in business? If you have been in business for more than 2 years, we will need to see your latest tax return/ company financials. Financial institutions like to see and ensure all the financial statements are up to date.
Having copies of all your documents show you are on track and prepared when you present your application.
3. There are sometimes exceptions to the requirement of financials when applying for a loan but these are subject to strict criteria and the availability of these loans should be discussed with your finance broker.
If you are an employee, buying a car for example, you will need to present payslips and a letter from your employer confirming your status. If you are looking to purchase a house, the lender will require two years of tax returns.
4. Do you have a clear CRA? A CRA File refers to the Credit Reference Association (CRA) file. Every time you apply for financing, whether is it approved or not, the activity is recorded on your CRA file. This also includes mobile telephones accounts.
Your file also contains information about any defaults you may have listed against you for up to 7 years.
Before you go to a lender, ensure there are no inaccuracies listed in your CRA file; if you do find any, clear these up. If you decide to go ahead with financing, I will require an acceptable explanation as to why the defaults were listed in the first place. Depending on the size of the default, you might have an opportunity progress with finance. If you have any unpaid defaults, you will need a good case to fully explain the circumstances to any prospective lender.
To get a copy of your CRA file go to: www.mycreditfile.com.au.
These are the standard questions I will have to ask you, in order to establish that we can precede with financing. Off course a lot more questions will be asked as we proceed with the application.
One thing I must point out though, anybody who has changed their name recently, all finance companies are governed by Anti-Money Laundering Laws; this means you now have to provide copies of acceptable current identification, so ensure all your identification is up to date and has the same name on it.
The most common identification required includes your driver's licence with confirmation of your current address - a copy of your change of name certificate will also be required if you've ever had a name change.