MyCRA Specialist Credit Repair Lawyers

Tag: commercial credit file

  • Commercial defaults: don’t risk it with your small business

    Media Release

    small business creditCommercial defaults: don’t risk it with your small business

    12 September 2013

    Credit to fund small businesses can be difficult to obtain, and a credit expert warns it is important to stay under the radar when it comes to your credit file to ensure you are not defaulted when you need it most.

    CEO of national credit repair company, MyCRA Graham Doessel, says small businesses can sometimes find repayments a juggling act but when it comes to maintaining a clean credit file it is essential to make sure all accounts are paid on time.

    “Running a small business can be a bit of a juggling act especially if revenue isn’t consistent, but despite this, it is essential that systems are developed to ensure accounts are paid prior to the due date regardless,” Mr Doessel says.

    He says many people don’t realise the ramifications of paying accounts late. Whether it be a business account or a consumer account – if it more than 60 days late you will likely end up with a default on your credit file. Even one account in default could mean you are either refused credit altogether, or offered a much higher interest rate.

    “Many businesses can find the higher interest charges alone can set them back way too much to make expansion or starting up viable,” he says.

    “I have a current client trying to fight a mistake on his business credit file which has seen a $1,000 default hinder a $1.4 million loan. Although he has been offered a loan, the 2% interest rate increase for bad credit will mean he has to pay a staggering $28,000 per year in additional interest.”

    He adds, that defaults can be made quickly, with less protection for SME’s in the commercial landscape.

    “Although many Credit Providers adhere to the 60 days in arrears rule before placing a default on your commercial credit file, technically, they don’t have to. The normal protections consumers are afforded in the Credit Reporting Code of Conduct are not extended to commercial credit,” he warns.

    Despite the laws, many of the Ombudsman Services do encourage Credit Providers to give adequate written notice to remedy an account in arrears prior to listing a default.

    Ideas to minimise your risk of defaults

    1. Pay all accounts on time. You need to have systems in place whereby credit cards and all bills are paid on schedule. If the business is running behind, Creditors need to be contacted and payment plans possibly worked out before the due dates to best avoid a default listing on your credit file. Be aware, that repayments to licenced Credit Providers (loans, credit cards etc) which are more than 5 days late will be noted missed on your credit file and listed as a ‘late payment’. These remain on your credit file for 2 years.

    2. Ensure all accounts are paid to you on time. Chase up bounced cheques and failures to pay immediately.  Too many accounts left unpaid can leave you short and run your business into the ground if left to continue. Regard any client non-payment as potential risks to your credit rating.  Develop a tactful system for retrieval ahead of time – reminding clients of the risks to their credit rating by defaulting on payments to you. If overdue accounts go beyond 60 days, notify the account holder in writing you will be referring the non-payment to a credit reporting agency.

    3. Consider credit checks for all potential account holders. Anyone who requests an account of significant proportions could be required to submit a credit application before the account is instigated. This involves you running a credit check on them with one of the major credit reporting agencies.

    4. Regularly obtain a copy of your credit file – once a year is recommended to ensure it is all as it should be. If there are any discrepancies or listings which you believe should not be there, address them prior to needing the extra credit for your business. This will mean less stress for you. You can do this by visiting www.freecreditrating.com.au.

    5. Minimise credit enquiries. If you are not sure about your business’ credit health, run your own check before applying for new credit.  You should also minimise credit applications. Some lenders are rejecting loans for as little as two credit enquiries in 30 days, or six enquiries within the year – so it pays to only apply for credit you intend to pursue.

    6. Safeguard your consumer credit file. Business is touchy and subjected to many unknowns, but the family home and your consumer credit file should be kept protected. If some major clients go under, and payments are not made – who’s going to help fund your now over-extended mortgage? Not only can your credit rating be compromised for five years, but your spouses’ as well. Any new credit will be at sky-high interest rates. You might lose the business, and any opportunities to borrow again for business in the future, but worse, you might lose your family’s ability to borrow at good rates for a mortgage, personal loan, credit cards and even mobile phones.

    7. Monitor your accounts regularly.  If you are the owner of the business but not the person responsible for accounts, ensure you still have hands on knowledge of the business’ expenses.  Check accounts are being paid; check receipts and credit card statements regularly.

    Mr Doessel says in the current economic climate with businesses potentially more likely to pay accounts late, there has never been a more important time to protect your credit rating.

    “Choose your credit wisely, choose your clients wisely, and make paying your debts a priority – regardless of the size of your business,” he says.

    You can find more information on your credit rating at www.mycra.com.au.

    /ENDS.

    For further comment:

    Lisa Brewster – Media Relations Ph 3124 7133     media@mycra.com.au

    Graham Doessel – CEO MyCRA Ph 3124 7133     www.mycra.com.au   www.mycra.com.au/blog

    246 Stafford Rd, STAFFORD Qld

    Photos available on request.

    This Image: David Castillo Dominici/ www.FreeDigitalPhotos.net

  • Veda warns small businesses not to overcommit in lieu of Federal Budget

    Credit reporting agency, Veda Advantage is warning small businesses in the lead up to the end of the financial year that the Federal Government’s asset write-off scheme could leave them exposed to higher credit risk.

    By Graham Doessel, Founder and CEO of MyCRA Credit Rating Repairs and www.fixmybadcredit.com.au.

    In Veda’s media release today, the company warns small businesses risk over-commitment acquiring additional credit to purchase new assets with the asset write-off scheme, saying it will not be robust enough to assist all small businesses in the coming financial year.

    The new small business instant asset write-off scheme introduced in the 2012/13 budget allows businesses with a turnover of less than A$2 million to write off each eligible business asset costing under A$6,500.  The purpose of the scheme is to provide an injection of funds for businesses to invest in new ideas.

    “It’s obviously very important to closely manage the credit you take on as a small business and there are simple steps you can take to manage risk. First and foremost you need to work out if you can afford to borrow in the first place, plan your budget appropriately to see when you spend your money and how much you can afford in repayments,” says  Veda’s Head of Commercial Credit & Procurement Risk, Moses Samaha.

    “Allow for interest rate rises and anything that might affect your future income, ensure you make regular and sufficient repayments to keep the credit debt below the agreed limit and be aware of penalties if you miss a payment.

    “It’s crucial to keep your cash flow coming in greater than cash flow going out – staying  on top of this is a key success factor to keeping your business running and driving revenue. These are all simple tips but they seem to be the same traps that SMBs continue to fall for – and they can be easily avoided.”

    A recent report from the RBA showed that small businesses were hit harder by the global financial crisis and have found it more difficult to recover than larger businesses in Australia which could drive SME’s to overcommit when trying to benefit from the new scheme.

    Here is an excerpt from that report:

    “According to business surveys and the Bank’s liaison program, conditions have been weaker for small businesses than their larger counterparts over the past two years. Following the 2008 downturn, there was a less durable recovery for small businesses than for large businesses; small business conditions only briefly returned to average levels in early 2010 before being below average for most of the following two years.

    The weak conditions are apparent in small businesses’ main concerns. In the mid 2000s, these entities were becoming increasingly concerned about attracting and retaining quality staff. Following the 2008 downturn, however, this was replaced by concerns about demand for their business’ goods and services, their cash flow/ profitability and broader concerns about the economic climate,” the RBA reports in its Small Business Finance Roundtable Report.

    This comes on top of the report’s findings that more small businesses are likely to load the family up with business debt due to a lack of access to credit in many circumstances.

    “Households owning businesses are more likely to have debt (including their business debt) than other households, with around 80 per cent of business-owning households having debt in 2010, compared to 66 per cent of other households, and they tend to have higher household debt relative to income,” the report says.

    “When the balance sheets of unincorporated small businesses are compared with those of the households that own those businesses, the households are much more likely to have debt than the businesses. This suggests that many small businesses may be financed indirectly by household borrowing rather than through explicit business borrowing.”

    The RBA also reports that tighter lending standards have a greater impact on small businesses and the reassessment of risk more generally by banks has also disproportionately affected small companies.

    See full post, Small business credit lock down pushes families into more debt.

    Small businesses struggling with debt need to know both their consumer and commercial credit files are put at risk if payments go into arrears past 60 days. To find out about repairing a commercial and or consumer credit file, contact our credit repair team at MyCRA Credit Rating Repairs on 1300 667 218.

    Image: Arvind Balaraman/ www.FreeDigitalPhotos.net

  • Small business credit lock down pushes families into more debt

    Media Release

    Small business credit lock down pushes families into more debt

    Small businesses have been forced to rely on personal credit due to what a former broker turned credit reporting accuracy advocate says are difficult times for access to credit for SME’s, with the family credit rating copping the fall out.

    A recent Reserve Bank of Australia report reveals that small businesses are more likely to have household debt due probably to a reduced access to business credit.

    The RBA’s Small Business Finance Roundtable report shows that for unincorporated business, the overall financial position of the business is tied up with the household.[fusion_builder_container hundred_percent=”yes” overflow=”visible”][fusion_builder_row][fusion_builder_column type=”1_1″ background_position=”left top” background_color=”” border_size=”” border_color=”” border_style=”solid” spacing=”yes” background_image=”” background_repeat=”no-repeat” padding=”” margin_top=”0px” margin_bottom=”0px” class=”” id=”” animation_type=”” animation_speed=”0.3″ animation_direction=”left” hide_on_mobile=”no” center_content=”no” min_height=”none”][1]

    “Households owning businesses are more likely to have debt (including their business debt) than other households, with around 80 per cent of business-owning households having debt in 2010, compared to 66 per cent of other households, and they tend to have higher household debt relative to income,” the report says.

    “When the balance sheets of unincorporated small businesses are compared with those of the households that own those businesses, the households are much more likely to have debt than the businesses. This suggests that many small businesses may be financed indirectly by household borrowing rather than through explicit business borrowing.”

    The RBA also reports that tighter lending standards have a greater impact on small businesses and the reassessment of risk more generally by banks has also disproportionately affected small companies.

    This sentiment is echoed by former broker Graham Doessel, now owner of credit repair business MyCRA and board member of newly formed Credit Repair Industry Association of Australasia. He says lending criteria since the Global Financial Crisis has tightened considerably, with many small businesses finding it near to impossible to qualify for credit.

    “The loops and hoops businesses need to jump through to secure funds for expansion is unnecessary and shuts many small businesses out. The process could be better streamlined to accommodate this huge market, meaning less would need to rely on their personal credit rating,” Mr Doessel says.

    Mr Doessel says the danger with small business owners involving personal credit in their small business borrowing is the chance of business debt and bad credit history spilling over to the personal credit rating.

    “Small businesses are on a very slippery slope when they use their access to consumer credit to fund business debt on a regular basis. If they happen to run into trouble with repayments these people are copping defaults on both their consumer and commercial credit files, effectively ruining not only their credit rating but potentially that of their spouse as well,” he warns.

    This comes as Smart Company reports today on new research by software firm MYOB showing 28% of small businesses use their home loan to finance their business in some way.[2]

    The survey of over 1,000 SMEs, shows how tightly linked mortgage rates and business finance really are.

    Just under 15% of SMEs utilise a line of credit through their home loan to help fund their business, 5% have funded their business by increasing the value of their home loan and 5% funded their business by redrawing against equity in their mortgage.

    A further 4% have used cash sitting in their mortgage offset account to pump into their business.

    “For many business owners, even those without commercial finance, an interest rate move doesn’t just affect their ability to repay the family home loan. For too many, home loan interest rate moves also affect their ability to keep their livelihood on an even keel,” MYOB chief Tim Reed says.

    /ENDS.
    Please contact:

    Graham Doessel – Founder and CEO MyCRA  Ph: 3124 7133
    Lisa Brewster – Media Relations  MyCRA   Mob: 0450 554 007  media@mycra.com.au

    http://www.mycra.com.au/ www.mycra.com.au.blog

    MyCRA Credit Rating Repairs is Australia’s leader in credit rating repairs. We permanently remove defaults from credit files.

    [1] http://www.rba.gov.au/publications/workshops/other/small-bus-fin-roundtable-2012/pdf/small-bus-fin-roundtable.pdf

    [2] http://www.startupsmart.com.au/funding/one-in-four-australian-small-businesses-use-mortgages-for-finance-survey/201206046502.html

    Image: Pixomar: www.FreeDigitalPhotos.net

     [/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]