2 min read
What lenders actually look at
High-street banks use automated credit scoring that weights historic defaults heavily. Specialist commercial lenders take a broader view, examining current trading performance, cash-flow patterns, the nature of any adverse entries, and whether the business has stabilised since the difficulty arose.
A single missed payment five years ago carries far less weight than an ongoing pattern of county court judgments or current arrears. Lenders distinguish between historic difficulty and present distress.
Types of adverse credit and their impact
- Late payments: Usually manageable if trading is now stable.
- Defaults (satisfied): Satisfied defaults age better than unsatisfied ones; lenders want to see the date and reason.
- CCJs against the company: Significant but not always fatal — see borrowing with a CCJ.
- Previous insolvency: The most challenging scenario; specialist rescue-finance lenders exist but terms are restrictive.
Being transparent about adverse entries at the outset saves time. Lenders will find them regardless, and unexplained entries raise more concern than explained ones.
How to strengthen your application
The strongest applications pair a candid explanation of past difficulties with clear evidence of current stability: up-to-date management accounts, three to six months of business bank statements showing consistent inflows, and a credible explanation of how circumstances have changed.
Security — whether that is a debenture over business assets or a director's personal guarantee — can offset credit risk and improve available terms. Figures below are illustrative of market ranges, not a quote from any specific lender.
Lender types to consider
Challenger banks, asset-based lenders, and specialist SME finance providers generally apply more judgement than the automated systems used by clearing banks. Brokers who work across multiple panels can match your profile to lenders whose risk appetite suits your situation without generating multiple hard searches on your file.
Frequently asked questions
Will applying damage my credit score further?
A soft search at enquiry stage has no impact. A full application typically triggers a hard search; confirm the type of search with the lender before proceeding if you are concerned about your file.
Does the company credit file matter more than the director's personal file?
Both matter. For limited companies, lenders check the company file first, but director personal credit is usually reviewed too — particularly for personal guarantees. See <a href="/answers/director-personal-credit-matter/">does the director's personal credit matter</a>.
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