Running a business is not easy at all. Whether you have decided to start a new business or you have already been running your business, you may have a CCJ on your credit report at any time. Business is all about money, and you may slip through the cracks in making repayments, and you can be issued a county court judgment (CCJ).
CCJ is an order issued by the court when you fail to pay off the money you owe from suppliers, contractors, and creditors. A CCJ cannot be issued immediately after you make a default.
When you make multiple defaults and, despite the warning letters sent by the lenders, suppliers and contractors, you do not turn to them, a CCJ will be issued against you.
Once the matter goes to court, you will have to follow the court’s instructions to make payments. The court can order you to pay all dues at once or in instalments within a specific period.
How financing with CCJ can affect your start-up
If you are trying to start a new business and have a CCJ on your credit report, financing your business is quite challenging. Most of the lenders will never lend you money. However, some of the lenders will be ready to lend you money, but only if you have a settled CCJ on your credit report.
If you apply for CCJ loans with no guarantor, you will have to pay a very high-interest rate because it puts a high risk on the lender. They will lose their money if you make a permanent default. High-interest payment helps mitigate their risk.
If you successfully finance your business despite a CCJ on your credit report, never assume that you have broken the back of the beast. Your business will suffer from building a reputation in contractors and suppliers.
Various suppliers run a credit check in order to know their financial commitment. Suppliers will be reluctant to do business with you in the case of CCJ as they will believe that you will make a default and fail to pay them off. Likewise, you will not establish a smooth working relationship with contractors.
How financing with CCJ can affect your established business
When you already have an established business, financing your business expenditure is equally challenging when you have a CCJ.
However, you still have some scope to convince your lenders to lend you money. In the case of a start-up business, you cannot get money so quickly because the lender has no idea of your financial behaviour.
However, your lender will likely lend you money when you take out a loan with CCJ to fund your business expenditure. This is because you have proven your financial commitment earlier.
In this situation, you have scope to tell them how you got issued a CCJ. Understanding your actual situation will likely help you fund your needs.
Tips for maximising your chances of getting the CCJ loan approved
A rule of thumb says that you should not have a CCJ on your credit report. Otherwise, online lenders will not entertain you, and if someone entertains you, they will charge a high-interest rate.
Sometimes unexpected events cause a CCJ, and in that case, you should follow the following tips to maximise your chances of getting the loan approved:
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Be honest
You should straightaway tell your lender about the CCJ. If you tell them prior to the credit check, they will likely take your honesty under advisement to decide whether they should lend you money. Note that there are several factors that can affect the decision of the lender about lending you money.
Sometimes the show up of CCJ on your credit report is not the result of your irresponsibility. For instance, you may fall sick in hospital and miss due dates. In this situation, the lender can be lenient in lending you money.
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Have a solid plan if you are a start-up
If you are a start-up, you may have some complications getting the loan approved, but you can find a way to achieve your goal by making a solid business plan that proves that your business will quickly make some money.
You should have a business plan to prove your financial capacity to pay off the debt for the next two years. Try to prove that your circumstances were different when you made default. It was a pure uncontrollable event, not financial irresponsibility.
If you prove to your lender about your financial strength, your lender will likely be able to sign off on your loan application.
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Arrange a guarantor
If you apply for a CCJ loan with no guarantor, you may have difficulty getting your loan approved, and this is because there is a huge risk to the lender.
To minimise the risk, the lender can ask you to arrange a guarantor with a good credit history, so when you make a default, they can call in on the guarantor to pay off the debt.
Note that if you make a default, not only yours but the guarantor’s credit score will be affected too. Make sure that the guarantor knows this fact. Arranging a guarantor can be quite tricky because nobody will enter into the contract to save their credit score.
The bottom line
Although you can get a CCJ loan approved, it is not that easy, and you will also end up paying a very high-interest rate. This is why it is suggested to improve your credit score before applying for a new loan.