Can you get business finance with a CCJ?
The truth about small business is that it’s never easy. If it was, everyone
would be running their own company. All sorts of
businesses can get stuck in a rut where they’re unable to make certain
payments, which in some cases may lead to a CCJ (County Court
Some CCJs are more severe than others, but it doesn’t
have to tarnish the reputation of the director in the long run, or be a
barrier to raising funds — business finance with a CCJ can still be possible to arrange.
Please note, this article is about business CCJs, and does not refer to consumer debt or consumer CCJs.
For personal debt advice, visit the Money Advice Service.
For business debt advice, visit the Business Debtline.
However, as you would expect, it’s more
difficult, and it does negatively impact your unique case for finance.
The whole picture is what matters to lenders — especially the ones we
work with — so you should be aware of what you can do to raise finance
with a history of debt trouble in the business.
What is a CCJ?
When you owe one of your suppliers, contractors or other creditors
money and the debt isn’t paid, the creditor can take court action
against you and your business. This is usually after a series of warnings.
When you receive a CCJ, it means the court has formally decided that
you owe money, and you have to pay up. The ruling will clarify how you
have to pay (e.g. a lump sum or in instalments), and specify formal deadlines
for the payments.
CCJs are recorded on your credit profile, generally for a period of up to
six years, unless you pay the full amount
within one month of receiving the CCJ — which means there’s a great
incentive to pay as soon as you can.
CCJs can even affect the Directors
of Limited Liability companies. Any viable business can get a CCJ, but in
the more serious cases, it may be a warning sign of a business in
Why didn’t I know about a CCJ?
In some cases you might not know when there is a CCJ against you. There are a few reasons this can happen, but whatever the reason you’ll still want to take steps to sort it out as soon as possible and protect yourself.
Information might not be up to date
Perhaps the person or business chasing you for payment has old details like an out-of-date address or a phone number that doesn’t work — this might lead to a surprise CCJ if they have no other way to contact you.
It’s unlikely but possible that it’s a case of mistaken identity — maybe your business’s name is similar to another — and sometimes CCJs may be issued to the wrong business. It’s also possible that it takes a few days to update CCJ information on a database. This could mean an underwriter will see a CCJ as unresolved when in fact it has been paid.
How do I deal with a CCJ?
In a nutshell, you have two choices — pay the judgment if you owe the money, or try to have the CCJ ‘set aside’ if you don’t.
Bear in mind that if you try to get a CCJ ‘set aside’ you’ll have to go to court to explain why you don’t owe the money. Either way, you should always be honest about whether or not you owe the money, and it’s worth talking to a lawyer if you’re unsure about what to do.
Will a CCJ harm my application for business finance?
One of the main requirements for agreeing loans is the credit rating of
the business. A CCJ will lower your credit score, and appear on your
records. When the underwriter checks your profile or if they search for
your business on companies house, they'll be able to see the CCJ
and the amount. It may even extend to your suppliers — modern credit
control applications means they can view recent CCJs and decide
whether or not to extend credit to you.
Naturally, a CCJ reflects badly on a business. The question the
underwriter or creditor will be asking themselves is: "if this business has
a history of struggling to make payments, why should they be trusted
to make repayments on a loan from us?" However, it doesn’t
mean you're automatically ruled out of securing business finance or
other forms of credit.
The whole business story
Many SME lenders look at the whole business case presented to them
for finance, and having a recent CCJ is just one part of the equation. This approach
means you have an opportunity to explain why you got the CCJ — quite
often, it can be because of unforeseen cash flow issues, like one of your
own customers missing a vital payment. It also means you can show
how your business has learnt from the CCJ, or how you’re now on a
better growth trajectory. Lenders take all this information on board
when making any funding decisions — so give them a chance to believe
in your business.
Unsecured business finance with a CCJ
This can be much more difficult to obtain, but it still doesn’t have to be
an immediate “computer says no”. Lenders will be looking at how
recent the CCJ was, and the reasons behind it. For example, if the CCJ
was three years ago for a one-off missed payment when the business
was in trouble, but the application is for a 6-month loan when the
company is in a strong growth period, you stand a much better chance
of getting an unsecured loan.
Secured loans with a CCJ
Unless you’re in a strong position like the above, secured lending will
be your best bet. In general, companies and Directors with poor credit
histories should look towards their assets to secure finance. Anything
that lowers the risk to the lender will make your case more attractive, so
being an asset owner is always a positive. Your assets don’t have to
include buildings either — finance can be secured against heavy machinery, equipment, invoices from big customers, or even your
Six ways to increase your chances of getting business finance with a CCJ
Pay it off immediately
The best thing you can do to increase your chances is satisfy the CCJ
immediately, and pay it off. It shows that it’s a temporary blip, but you
reacted when you most needed to, not to mention that it won’t stay on
your record as long if it’s paid off within a month.
Learn from past mistakes
Be prepared to show how the business has learnt from the CCJ, and
is making current payments on time — anything that indicates stability
makes your business more attractive to the lender.
Make sure the time is right
The more recent the CCJ, the more it will worry potential lenders. In
some instances, especially if you received one of the more severe
judgments, it may be better to wait a while before looking for business
Take CCJs seriously
Don’t accumulate a number of CCJs. It reflects very poorly on your
company, and it will lower your credit score. Worse, it shows a lack of
concern for your payment obligations.
Use any valuable assets you or your business have to secure finance.
This helps lower the risk for the lender, making your business a more appealing proposition.
Use an intermediary
Going through an intermediary like Funding Options means you’ll be able to
make use of our good relationships with different lenders. We listen
to understand your whole story, the reasons behind the CCJ, and work to
present your case to lenders in the most compelling way.
Overall, if there’s one thing to take away from this article as a business
-owner with a CCJ, it’s this — CCJs are serious, but they don’t have to ruin your chances of securing funding.
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