Avoid Being Declined For Finance

Wednesday, 10. December 2008

It has been reported this week that many people do not see the distinction between credit crunch and recession. For those that lived through the last recession, as I did, you will know how hard things got before we turned the corner and things started to dramatically improve. And this was all down to a recession, which was pretty much left to run its course by the Government. Whilst it seemed pretty harsh at the time it was a way of streamlining business in the UK and weeding out the good from the bad. Sadly, in our industry, like many others, some really good companies got dragged down with the others but in the main it was as a result of a lack of business and cash flow rather than the ability to write up new business, there was plenty of credit available for those that wanted it and were good risk. This recession, on the other hand, is unique. It started with a credit crunch which means that there was simply a running out of money to lend. And in very simple terms this is why we have entered a recession, people just didn’t have the money to spend, hence the reason why the Government is attempting to stimulate the economy by providing and guaranteeing extra cash for consumers and small businesses via the banks. Will this work? We are yet to see but one thing is for certain there is less lending going on as lenders still run down available funds. Most of my business comes from referrals. These come from accountants, IFA’s, bank managers, solicitors and existing clients as they want to refer clients and friends to someone they can trust and they know will do everything possible to help especially when things go wrong. So our enquiries are still running at the same level as last year but we are seeing many companies and individuals turned down for finance that would have flown through before the credit crunch. Lenders are being very very careful and only lending to those that they feel are ‘undoubted’ and I’m finding that some people are being refused finance for relatively trivial reasons. Companies are being declined because one of the directors has missed a mortgage payment or has been late paying credit cards. Consumers are facing the same problems for similar reasons. They may seem pathetic reasons but the fact is that unless you take care of your current credit you may not be able to arrange future credit until the banks are re-capitalised and have more money available to lend. Make sure that you are on top of your payments and if for any reason due to illness or redundancy you have been through a bad patch make sure that you update the notes on your credit files so that anyone carrying out a search will see the reasons why adverse has appeared and may look a little more sympathetically at your application. For more information on putting notes on your credit files buy my book, An Insider Guide To Car Finance by visiting www.carfinanceandleasinginfo.co.uk . By Graham Hill