Credit Scores & Loans
Discussion
Morning Fellow Pistonheaders!
I have completed my Experian credit report last night, It indicated that I have a credit score of 875, this is placed in the 'fair' category.
My question to you guys is, do you think its possible for me to obtain a £5000 loan to set up a small business, or will they see me as a high risk?
I am 19 years old, earning around £850 per month if that helps.
Cheers
Ben
I have completed my Experian credit report last night, It indicated that I have a credit score of 875, this is placed in the 'fair' category.
My question to you guys is, do you think its possible for me to obtain a £5000 loan to set up a small business, or will they see me as a high risk?
I am 19 years old, earning around £850 per month if that helps.
Cheers
Ben
How are you making £850 per month at the moment? And is that before or after tax? Where do you live, and what rent/bills do you pay?
What do you think the repayments on a £5k loan will be per month, and how do you plan to make them?
If you're going to continue doing whatever you're doing to make £850, and that's an after tax figure and you've few bills then there's a fair chance you'll get the money, because you could afford to repay it even if your business fails.
On the other hand, if you're going to stop doing your £850/mth job to do your own business instead, then I think you're MUCH less likely to get the money. Reason being is that most businesses which are setup don't last more than about 12mths. Sad but true. I'm assuming that the £5k loan would be over 3 years or something, so if the business is required to make the repayments, then the bank needs to be sure that you'll repay the money and that won't happen if this is your only income and it goes tits up.
If you want an actual business loan, then you have to prepare all sorts of documentation to demonstrate to the bank that the business idea WILL make money. You'll also have to put up personal security anyway, so that if the business can't make the repayments then the bank comes after you anyway, so you have to prove you can afford to repay the loan without the business basically.
It might be worthwhile, depending where you live and what your business idea is, having a look to see if there's any grant money available - because if you tick certain boxes for thee government they will give you money to help start your business, or they can sort you out with loans on better terms.
In reality, though, your best bet will be to keep earning £850 (assume after tax) and keep your bills down (assume living at home). In which case, as I said at the top of this reply, you should be able to get a personal loan which you can use for any purpose (though you should tell them) and there's a good chance of being approved for that. But the bank will expect it to be repaid out of your CURRENT income, not the business profits. (Same as if you were to borrow £5k to buy a car, they need you to afford the repayments regardless of what you spent the money on.)
HTH
What do you think the repayments on a £5k loan will be per month, and how do you plan to make them?
If you're going to continue doing whatever you're doing to make £850, and that's an after tax figure and you've few bills then there's a fair chance you'll get the money, because you could afford to repay it even if your business fails.
On the other hand, if you're going to stop doing your £850/mth job to do your own business instead, then I think you're MUCH less likely to get the money. Reason being is that most businesses which are setup don't last more than about 12mths. Sad but true. I'm assuming that the £5k loan would be over 3 years or something, so if the business is required to make the repayments, then the bank needs to be sure that you'll repay the money and that won't happen if this is your only income and it goes tits up.
If you want an actual business loan, then you have to prepare all sorts of documentation to demonstrate to the bank that the business idea WILL make money. You'll also have to put up personal security anyway, so that if the business can't make the repayments then the bank comes after you anyway, so you have to prove you can afford to repay the loan without the business basically.
It might be worthwhile, depending where you live and what your business idea is, having a look to see if there's any grant money available - because if you tick certain boxes for thee government they will give you money to help start your business, or they can sort you out with loans on better terms.
In reality, though, your best bet will be to keep earning £850 (assume after tax) and keep your bills down (assume living at home). In which case, as I said at the top of this reply, you should be able to get a personal loan which you can use for any purpose (though you should tell them) and there's a good chance of being approved for that. But the bank will expect it to be repaid out of your CURRENT income, not the business profits. (Same as if you were to borrow £5k to buy a car, they need you to afford the repayments regardless of what you spent the money on.)
HTH
Gassing Station | Finance | Top of Page | What's New | My Stuff