MyCRA Specialist Credit Repair Lawyers

Tag: small business credit

  • 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

  • Small business finance regulation deferred

    small business financeIt seems the controversial draft legislation regulating small business finance has been deferred – with the Government now saying it wants to take the time to get reforms right. This follows a barrage of criticisms from business groups that the new laws would make it much harder for small businesses to get funding.

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

    The Government’s Christmas ‘surprise’ for small businesses in the form of draft legislation to regulate commercial lending certainly met some criticism in the lending and small business sector.

    The legislation proposed prohibiting people from “engaging in credit activities” in relation to a small business credit contract or a small business consumer lease unless they hold a permit.

    Business publication SmartCompany confirmed last week in the story ‘Government backflips on plans to regulate access to credit for small business‘ that Treasury will put off any action on small business finance.  T

    hey said Financial Services Minister Bill Shorten announced the withdrawal of the draft legislation at a meeting with the Council of Small Business of Australia and the Commercial Asset Finance Brokers Association of Australia last week.

    It was also reported in Australian Broker today in the story ‘Commercial lending off the table…for now’ that Treasury indicated that its consultations had found “a need to further examine a number of key issues” relating to business credit.

    “Treasury’s release said that the Government considers that it is important to get the reforms right, given the important role that small businesses play in the Australian economy,” Gadens Lawyers partner Jon Denovan told AB.

    The CAFBA said in a statement that the government’s move to dump the draft legislation was a common sense result.

     “CAFBA maintained staunch resistance to all aspects of the draft regulation and was unwilling to accept or compromise its position, as CAFBA fully understood the debilitating impact of the proposed regulation and the flow-on effects to every small business in Australia,” it was reported in SmartCompany.

    This was our position on the draft legislation when it was released just days before Christmas:

    CEO of MyCRA Credit Rating Repair, Graham Doessel says the proposed changes would be widely criticised by small business advocates as stifling the flow of business credit in Australia and that the changes are unnecessary form of “hand holding” for Australian business owners.

    “Australian small businesses are already doing it tough getting credit out there post GFC – this is going to mean they will struggle even further to expand and there will be less start-ups,” Mr Doessel says.

    Where we did want to see change, was in the basic rights afford to commercial credit file holders before recovery is commenced.

    In the consumer landscape, if an account is overdue, then the account holder is afforded a 30 day right to remedy under the Credit Reporting Code of Conduct. This is meant to ensure that fair and reasonable means have been taken to attempt to recover the outstanding amount before further action is taken, and before the consumer’s credit file is defaulted.

    As commercial credit is not covered under the Code, this right is currently not provided to commercial credit file holders.

    The common courtesies which consumers are afforded and which many assume stay with them in the commercial sphere just don’t apply – many don’t realise just how big a risk commercial credit is.

    Here’s more from our media statement:

    “It’s like the ‘wild, wild west’ out there with some lenders defaulting small businesses with little to no warning.”

    Once a default is placed on a commercial credit file, then the length of time it remains on the credit file is legislated by the Privacy Act 1988.

    “A commercial credit file holder is still subject to 5 years of bad credit if they end up with a default listing, the ramifications are still the same – they are generally refused mainstream credit, refused mobile phone plans, car finance and credit cards – but the rules for how the default gets there in the first place are just not there,” Mr Doessel says.

    “In theory, you can be one or two days late in paying a commercial account and you can have your ability to obtain credit ruined. There is no right of redress, as there is no legislation governing notification requirements in the commercial credit sphere.”

    Mr Doessel says the Government has completely missed the mark on what small businesses need to thrive and survive.

    “Most don’t need restrictions on available credit, they just need the basic credit reporting rights that they deserve,” he says.

    We’re glad the Government has put this legislation on the backburner, but still hope at some stage commercial credit reporting will be reassessed.

    Image: franky242/ 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

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  • Small business credit hard to obtain

    An interesting article featured in Broker News today, for those interested in small business lending criteria, and small business credit files.

    It is harder than ever for small businesses to borrow. The story, titled ‘Lenders blasted for small business risk sums’ features Credit Reporting Agency, Dun & Bradstreet criticising lending criteria when it comes to small business.

    D & B says up to 400,000 small businesses who should qualify for finance are missing out due to the inability of credit providers to adequately assess and price their risk.

    Here is an excerpt from that story:

    Dun & Bradstreet has said that up to 400,000 businesses would immediately qualify for finance with a risk profile ranging from minimal to low, out of more than one million unincorporated businesses.

    CEO Gareth Jones said lenders have historically been hesitant about extending credit to small businesses as many are unincorporated entities with little or no commercial credit history.

    “Previously, it has been nearly impossible to appropriately assess small business risk as small businesses are often indistinguishable from their owner – the commercial and consumer entity are the same,” he said.

    “A holistic picture of small business risk can only be obtained by acquiring an understanding of an entity’s commercial and consumer profile,” Jones said.

    The comments came as Dun & Bradstreet launched a ‘Small Business Risk Score’ that brings together information from its database on both a commercial enterprise and its owner to enable risk assessments.

    The score predicts the likelihood of a small business entering bankruptcy over a 12 month period, based on factors including business to business payments, time since the last consumer default, and the volume of credit enquiries.

    The lines between personal and small business credit files do blur quite frequently. Often one credit file affects the other when creditors are looking at suitability for finance.

    To give people the best chance at small business credit, they should remove bad credit history like defaults and even excess credit enquiries from either or both credit files prior to applying for small business credit.

    It may be that credit file errors and inconsistencies are holding small businesses back from expansion – in which case there is a good chance they can be removed.

    For more information on bad credit history, contact MyCRA Credit Rating Repairs tollfree 1300 667 218 or visit the main website www.mycra.com.au.

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

    Image: renjith krishnan / FreeDigitalPhotos.net