Before you get too excited, I mean rejected by your lender. You know, for a commercial loan, lease, investment loan, mortgage…any kind of debt.
The current homogeneity of the financial services sector is astonishing. Most lenders – and it’s not only banks – follow the same procedure:
- Can the borrower repay the loan?
- Can the borrower service the loan?
- What security do I have?
No problem then. But what if you don’t have security and are self employed with income that’s unpredictable (but still well north of servicing requirements)?
That’s easy, don’t go to see your bank. They won’t be interested. Your broker may well be only a mortgage broker, so where do you turn to?
You need to see a finance broker – preferably before you see a bank. The finance broker will take stock of your financial position and give you a realistic assessment of what your options are.
There are now many substitute lenders in the market at interest rates that are quite competitive – I guess if you’re rejected for funding any rate is competitive but that’s not what I mean.
For example, say you have established a profitable business and have been operating for a few years without debt. You’ve decided to expand your business and have provided your bank with financial data and they have run the numbers and told you – very politely and after looking at it for 8 weeks – sorry, credit rejected your application.
You could go to another lender. Before you do:
- Find out why your application was rejected.
- Question the reasons that they give you.
- Make sure information that you provided hasn’t been misinterpreted.
- Ask if a credit enquiry has been made (too many in a short space of time can be construed as a negative for some lenders).
Once you have this data then, only then, should you try again.
You can be put through the mill at a bank or you can go directly to a finance broker. What are the benefits? A finance broker:
- Will provide you with an accurate assessment of your chances.
- A good one will only charge you (for commercial/corporate transactions – will not charge for mortgages) if they’re successful. So they won’t waste their time on a deal that’s unlikely to succeed.
- They will know which banks and – more importantly – which bankers will understand your business and transaction.
- They will increase the number of lenders that can look at a transaction and thus create a competitive bid for your business. This ensures that pricing is kept lower than if you went to a single lender.
If you’ve been rejected you always have a choice.