Adrian Solomon

Making sure a 'perfect client' isn't declined

How many times have you submitted a case to a lender confident of an approval, only to learn that your client’s case is later declined by a lender? I’m sure you remember the frustration involved.

Here, I take you through the reasons why your ‘perfect client’ may have been declined and the steps that can be taken to package a case efficiently.

The 'perfect client'

Let’s call the client Perfect Co Ltd. The retailer has come to you looking for advice on how it can find the funds to make a large stock purchase. A flick through some brochures, a few newsletters and website visits later and you’re sure that you’ve found a lender that fits Perfect Co Ltd, well, perfectly. The company is profitable, long established and reports both a high turnover and stable growth. There’s no way a lender could decline this deal. Or could they?

Why the decline?

The lender has called and it turns out the perfect client ‘on paper’ was only that. Questions must be racing through your mind. Has the lender changed its criteria? Did I miss something in the client’s accounts? How can I explain this to my client? While it’s possible that your client meets minimum criteria – or goes far beyond that – the smaller details can make all the difference.

From a lender’s perspective, it seems to be similar obstacles behind a declined decision. For example, financial accounts often tell a different story to recent bank statements. A client may be profitable, but falling behind on VAT repayments is often a red flag for lenders. Small details like unpaid direct debits and other signs of pressure on liquidity can turn an ideal client into a case that lenders will struggle to support. Ultimately, it all comes down to how the bank account presents itself and the client’s ability to make the necessary loan repayments.

What can be done?

There’s never a guarantee that a submitted case will receive a stamp of approval. However, more could be done to make sure your time isn’t wasted submitting unsuccessful cases. It’s time to rethink bank statements in the application process and vital to ask clients the right questions. Will bills appear on the statements? How many and at what cost? Do you have any outstanding HMRC payments? Questions that lenders are bound to eventually ask.

After that, it’s all about discussing this information with relevant lenders. The ability to offer a fuller picture for lenders allows them to carry out pre-checks, add notes to a case and better understand a client’s situation.

One broker I recently worked with was pleased to learn that his explanation regarding the seasonal highs appearing in a client’s business bank statements played a pivotal role in our underwriting team’s assessment. Despite the clever algorithms at work, there is often a human involved in final credit decisions.

With an improved understanding of what lenders are looking for and an open dialogue, we can all use our time more efficiently. Through well-packaged cases – highlighting all aspects of a business’s financial activity – the most suitable clients will stand the best chance of being approved for funding.

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