The Business Lending Blog

More than just a number – Understanding your credit profile

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Credit is critical to a growing business and whenever you apply for a credit facility, the provider is going to want to know if you are a safe bet. Understanding what financial providers look for and learning how to better manage your credit profile is an important skill for business owners.

At Linked Finance, we’re passionate about helping great local businesses to grow and we know that access to fast, fair and affordable finance is vital to the success of Irish SMEs.

For business owners today, credit is crucial. There are very few businesses who do not require some sort of credit facility – be it a mortgage, lease agreement, asset finance, term loans, overdrafts etc.

Whatever the facility, the provider is going to want to evaluate your creditworthiness and ensure that you have the ability to repay. Understanding what financial institutions look at when evaluating a credit application will give you a better chance of getting a positive decision.

Here are just some of the key things that financial providers look at when making credit decisions.

1. ICB Reports

The Irish Credit Bureau (ICB) is the principal credit reference agency in Ireland for personal borrowing, and was established in 1965 by a number of financial institutions. The stated objectives of these institutions in establishing the ICB were – 

‘to assist in lowering the cost of credit, enable faster decision making in the provision of credit, and aid in the avoidance of over-indebtedness of its members’ customers.’

Over 140 lending institutions register information with the ICB, usually on a monthly basis. Each time you apply for credit from one of these finance providers, the provider accesses your credit report to find out about your performance under previous credit agreements.

ICB reports are the main source of information used by lenders to evaluate your credit history. 

2. Third-party Sources

Beyond, the ICB there are other commercial organisations operating in Ireland who collect and provide credit information relating to local businesses. These include Vision Net, CreditSafe, DueDul and Experian. Although these third party tools can be useful in providing part of the picture, a good score on any of these does not guarantee that you or your business will be approved for a credit facility. The information is not always up-to-date and they only factor in filed accounts (not current trading etc.), favourable industry conditions or recently won new contracts.

3. Bank Statements

Affordability and repayment capacity is another critical area that financial providers look at when making SME credit decisions. Basically, lenders want to ensure that you will be able to make repayments. To establish this, they will want to review activity in your bank accounts to see if you have been missing payments recently or if there are days when you wouldn’t be able to make repayments if you are approved for the credit facility.

4. Financial Accounts

The stability of your business is another major factor in credit decisions. A long trading history, a good track record of meeting your financial commitments and consistently strong trading performance are all good indicators that you will be in business for the duration of the credit facility.

If you’re an established business, lenders will want to evaluate your profit and loss accounts for the last couple of years to see if turnover is increasing and if the business is profitable. They will also want to look at your balance sheet to see if the your business has a positive net worth. Ultimately they are interested in seeing that if the business closes, will there be enough assets to cover all of the liabilities?

5. Collateral & Security

In the event that you can’t make repayments, lenders will often want some form of security to ensure that if you cease trading they will be able to take ownership of the asset and dispose of it to recover their principal. It makes sense for the financial provider but many strong and stable Irish businesses don’t have a long list of tangible assets.

Many SMEs might not have the collateral required to access traditional forms of credit that require security. That’s why at Linked Finance, we don’t require you to secure finance against an asset. All we ask is that you give us your word by way of a personal guarantee.

6. Plans & Projections

Beyond your credit history and current trading performance, financial institutions will also want to build a picture of where the business is heading. This can be the most difficult and time consuming part of a credit application. Financial providers may want to see business plans and cashflow projections for the years ahead.

Anyone who runs their own business will know that finding the time to sit down and create a comprehensive business plan, is a tough ask. Business owners are time poor and investing so much time and energy in a paper exercise like this can discourage many entrepreneurs for seeking the funds they need to grow.

Obviously, if you are a start-up looking for seed capital, you will need to have an airtight plan for how to turn your idea into a viable business. Unfortunately, even businesses who have been trading well for years and who simply want a loan to purchase more stock or to buy new equipment, will often be asked to submit a business plan or cashflow projections.

At Linked Finance, we don’t ask borrowers for complex business plans or cashflow projections.

Now wait

There may be other documents required by some lenders or additional hoops that you have to jump through. Once you’ve ticked all of the boxes, written your business plan, submitted your bank statements, shared your financial accounts and put together your cashflow projections, all you have to do now is wait for an answer.

According to a recent report from ISME, Irish SMEs wait an average of 8 weeks from request to drawdown. That’s not ideal if you want to move quickly to take advantage of an opportunity in your market.

A Better Way

At Linked Finance, we want to help Irish SMEs to access the funds they need to grow. That’s why we’ve developed a quick, hassle-free application process that business owners love.

  • Apply online in 2 minutes
  • Get approval in just 8 hours
  • Draw down funds within 2 days
  • No business plans
  • No collateral requirements

If you’ve been trading for 2 years and have an annual revenue of more than €80,000, we can help. We’ve built our credit process around 2 documents that most business owners will have to hand:

  1. Last 6 months bank statements
  2. Last set of financial accounts

Complete our 2-minute online application, send us these documents and we can get you a provisional credit decision within 8 working hours. 

So don’t hesitate, fill in our 2 minute application form and a member of our team will be in touch…