Financing help

[Adamp]

Good day everyone,

I am looking for some help and information regarding financing. I am in a partnership with 2 other individuals in business. One of the other members we found out recently is blacklisted/listed on ITC. Now my question is this - When applying for financing for a company vehicle that will be done on the company's name, will the fact that one of us are blacklisted affect the businesses credit rating? As the person was already blacklisted before we started the partnership.

Some information regarding this would be greatly appreciated.

Thanks

 

[undesign]

Good day everyone,

I am looking for some help and information regarding financing. I am in a partnership with 2 other individuals in business. One of the other members we found out recently is blacklisted/listed on ITC. Now my question is this - When applying for financing for a company vehicle that will be done on the company's name, will the fact that one of us are blacklisted affect the businesses credit rating? As the person was already blacklisted before we started the partnership.

Some information regarding this would be greatly appreciated.

Thanks

It may affect your finance application - normally (and more so when it is a new business) the directors will have to sign surety for the finance amount. The bank may or may not do a credit check on the sureties.

If they do it could influence the outcome in terms of declining or interest rate.

 

[guest2013-1]

My friend has a partnership run business, even though the car would be done under the company name, both of them had to submit their own financial records as well. So this will count against you.

Also, if I were you I'd draw up some solid legal documents, I've seen one too many businesses fall apart when their "partner" ducks with the money, and the blacklisted status only throws up red flags IMO

 

[guest2013-1]

It may affect your finance application - normally (and more so when it is a new business) the directors will have to sign surety for the finance amount. The bank may or may not do a credit check on the sureties.

If they do it could influence the outcome in terms of declining or interest rate.

Banks always does credit checks on the sureties, especially for something like this

 

[milomak]

you should have setup something along the lines of a CC. That way there is limited liability to what you have put into the business. The danger with partnerships is that if something goes wrong, your personal assets are at risk.

 

[Pitbull]

Good day everyone,

I am looking for some help and information regarding financing. I am in a partnership with 2 other individuals in business. One of the other members we found out recently is blacklisted/listed on ITC. Now my question is this - When applying for financing for a company vehicle that will be done on the company's name, will the fact that one of us are blacklisted affect the businesses credit rating? As the person was already blacklisted before we started the partnership.

Some information regarding this would be greatly appreciated.

Thanks

Remember the companie is it's own legal entity. No matter if ALL board members/Partners are Blacklisted, it has no bearing on the Company. The Company is being accessed as a legal entity, they will do credit checks on the Company and also bank statements for the said company.

In short. No it will not affect the application

 

[Pitbull]

you should have setup something along the lines of a CC. That way there is limited liability to what you have put into the business. The danger with partnerships is that if something goes wrong, your personal assets are at risk.

This is what I referred to. I don't know what kind of a business they registered.

 

[milomak]

Remember the companie is it's own legal entity. No matter if ALL board members/Partners are Blacklisted, it has no bearing on the Company. The Company is being accessed as a legal entity, they will do credit checks on the Company and also bank statements for the said company.

In short. No it will not affect the application

Given by company he means partnership, it will have an impact on the application as the partners are joint and severally liable for the partnership.

 

[Pitbull]

Given by company he means partnership, it will have an impact on the application as the partners are joint and severally liable for the partnership.

True, if it's just a normal Partnership then yes.

But I assume he meant that they have a company (CC/Corporate) of which they are 3 members. Any which way, if it's a CC or a Corporate then you should have nothing to worry about.

If it's a normal partnership then yes, there might be problems.

 

[DJ...]

you should have setup something along the lines of a CC. That way there is limited liability to what you have put into the business. The danger with partnerships is that if something goes wrong, your personal assets are at risk.

Even with a CC, members are often required to sign personal surety for finance. If the member has been blacklisted then you're going to have to be in a position to cover his portion of the surety by putting up your own assets, or find alternative financing. The limited liability of a CC doesn't necessarily cover all aspects of liability. A bank is well within its rights to reject your application without personal surety.

@op: I've bene bitten through a CC before and all I can say is make sure you have an impartial lawyer structure a watertight association agreement if you're covering his ass...

 

[milomak]

I suppose I did put it quite simplistically. Yeah you are right in that if the net assets of the CC do not meet the bank’s requirements on a stand alone basis then the bank would look to the members to fulfil the shortfall.

 

[Adamp]

My apologies for the delayed reply. Thanks for all the advice. As I was getting stressed regarding this, as my knowledge with it is quite limited. We are a CC based company. I have 40% share, another partner 40% and the blacklisted partner with 20%. He informed us regarding this on the weekend. And as in the past all our assets was baught cash we where not aware of his listing. That was why I first came to a forum to get more info about this, as it spares humiliation in my opinion when applying for finance and it gets rejected.

Lets say for example the bank requires surity and put myself up for it. Will they then only check my credit status? Or will they look into all partners involded's credit status?

Once again thanks a lot for all the replies. It is much appreciated.

 

[Adamp]

I suppose I did put it quite simplistically. Yeah you are right in that if the net assets of the CC do not meet the bank’s requirements on a stand alone basis then the bank would look to the members to fulfil the shortfall.

Myself and the other 40% partner have done a lot of credit though banks with no hassles at all over the past +-10 years. It just worried me that the 20% partner would affect my/the companies credit rating due to his previous incompetence. But as I said, my knowledge with the current concern is very limited.

 

[DJ...]

Lets say for example the bank requires surity and put myself up for it. Will they then only check my credit status? Or will they look into all partners involded's credit status?

Once again thanks a lot for all the replies. It is much appreciated.

All partners if the CC is applying for finance, which it will have to. You can't take out a personal loan for business needs (well not really). You need to go in and speak to your bank about this. Although there are many other trade and transaction based finance companies available in SA who are not quite as averse to risk as the banks are at the moment. (BTW, I think your chances are slim with the bank).

What do you need the finance for? Is it transaction based? Because I do know of a few companies willing to use the transaction as security...

 

[Pitbull]

Myself and the other 40% partner have done a lot of credit though banks with no hassles at all over the past +-10 years. It just worried me that the 20% partner would affect my/the companies credit rating due to his previous incompetence. But as I said, my knowledge with the current concern is very limited.

If your CC's turnover/profit exceeds the needs required by the bank as surity then you have no problems. They should not check your or any of your partners credit records. They might if your company does not meet their requirements to cover the loan.

But I won't stress about it if your CC has been running at least 2 years and turns a nice profit

 

[Adamp]

All partners if the CC is applying for finance, which it will have to. You can't take out a personal loan for business needs (well not really). You need to go in and speak to your bank about this. Although there are many other trade and transaction based finance companies available in SA who are not quite as averse to risk as the banks are at the moment. (BTW, I think your chances are slim with the bank).

What do you need the finance for? Is it transaction based? Because I do know of a few companies willing to use the transaction as security...

The finance is for a company vehicle that is required for one of our sales rep's. An Audi A3, new shape.

 

[DJ...]

Myself and the other 40% partner have done a lot of credit though banks with no hassles at all over the past +-10 years. It just worried me that the 20% partner would affect my/the companies credit rating due to his previous incompetence. But as I said, my knowledge with the current concern is very limited.

Your partner won't affect your personal credit rating at all, and like I said, it's the CC applying though, not you in a personal capacity (technically). However if your CC's assets cannot cover the full finance (and the bank doesn't just base this on value btw) then the members will have to sign surety, which your blacklisted member can't do (banks refuse to allow a transaction to serve as security). Therefore either you and the other member cover the full amount and credit the other member's loan account plus interest (and ensure you're covered with your association agreement), or find alternative financing...

 

[undesign]

Yes, all the members will typically have to sign surety. Corporate protection via a CC or company for a SME is really a myth - except for small incidental creditors like telkom, electricity etc. For finance, rental, big suppliers etc. surety is the norm.

Nevertheless you may be able to negotiate with the bank if the 20% member has an ITC problem.

As DJ said, make sure you have a decent association agreement. It will save a lot of tears later on...

 

[DJ...]

If your CC's turnover/profit exceeds the needs required by the bank as surity then you have no problems.

Kark #1. Depends on the term of the finance. In fact it depends on a number of things, that being one. They do not just look at turnover/profit and make a decision.

They should not check your or any of your partners credit records.

Kark #2. They have to, regardless of whether or not the business meets certain requirements.

But I won't stress about it if your CC has been running at least 2 years and turns a nice profit

Kark #3. Market conditions change over a 60 month term loan. They change month by month and turnover/profit are but two of the items looked at. IIRC it requires a full set of management accounts for a very good reason...

 

[Adamp]

If your CC's turnover/profit exceeds the needs required by the bank as surity then you have no problems. They should not check your or any of your partners credit records. They might if your company does not meet their requirements to cover the loan.

But I won't stress about it if your CC has been running at least 2 years and turns a nice profit

Thanks a lot Pitbull. If the turnover/profit to qualify for finance are checked then the total amount of the vehicle would be covered easily by previous years turnover.

I am just very glad to know that I am not affected due to this. As I was concerned that they might come to the company and collect items to make up for his own debt.

You all have been very helpful.