Before a funder agrees to fund your business, expect it to run credit checks. The SME finance industry code says a funder's risk assessment should cover the business and its principals, meaning the owners or directors, as well as the finances. A judgment or a default can change the answer, or the price. It helps to know what is on your record before a funder does.
Who holds credit records in South Africa
Credit records are held by credit bureaux. The bureaux include TransUnion, XDS and Consumer Profile Bureau. The National Credit Regulator registers credit bureaux and lists them on its website.
When a funder checks
Funders check as part of deciding whether to fund you. GoTyme, for example, says its final approval depends on underwriting and credit checks. If you'll sign a personal surety, expect your own record to matter too. See personal surety.
How long things stay on a record
NCA regulations set these maximum periods for consumer (personal) credit information, such as a director's own file:
- A civil court judgment: up to five years, or until it is rescinded by a court or abandoned by the credit provider, if that comes first.
- An adverse classification (a "default" style listing): up to one year, or the period set in section 71A of the NCA.
- Enquiries (each credit check a funder runs): one year.
The regulations speak of "consumer credit information". They do not say how these periods apply to a company's or close corporation's (CC's) own file, so ask the bureau if that matters to you.
What a judgment or a default can mean
A funder will ask about anything on the record, whether it is against the business or against a director personally. Be ready to explain what happened, whether it is paid, and what has changed since. A funder looks at the whole picture, including turnover, cash flow and existing debt, so an explanation with proof is worth having ready.
What to do before you apply
- Get your own report first. Under section 72 of the NCA, every person has the right to inspect their own credit bureau file free once in any 12 months, and to challenge anything wrong in it. So you can ask a bureau for a free copy of your credit report.
- Look for mistakes. An account you've paid that still shows as unpaid, or one you don't recognise. If something is wrong, you can challenge it with the bureau.
- Settle what you can. If a judgment against you personally is paid, keep the proof. NCA regulations say credit bureaux must remove paid-up judgments from consumer records once the capital is settled, so send the bureau your proof if it still shows.
- Tell us upfront. If there is something on the record, say so when we first speak. It is much easier to pick the right funder knowing it than to find out after an application goes in.
What we won't say
We won't tell you a bad record doesn't matter, or that a funder won't look at it. Funders check. What we can do is look at your business before an application goes anywhere and tell you honestly which funding types are worth trying. See why funding gets declined.
Next step
Tell us what's happening, including anything on your record. Check your funding fit.
Sources
- sasfa.net: Risk Assessment 2.3, "The risk assessment should encompass the business, principal / merchant and financial review
- gotyme.co.za: final approval subject to underwriting and credit checks
- ncr.org.za: NCR register of credit bureaux, "Records found: 55", including "TransUnion Credit Bureau Ltd", "Xpert Decision Systems Ltd" and "Consumer Profile Bureau Ltd
- gov.za: Government Gazette 38557, 13 March 2015, Notice R
- gov.za: GN R
- justice.gov.za: National Credit Act s72, "inspect any credit bureau ..