New LTD, shop lease and business bank account with poor credit

[gregosaurus]

Hello, hope someone can advise.

Partner and I in process of setting up a company, each have 40% share and 20% from an investor. We will be the only two directors. I have poor credit whilst my partner's is good.

I am concerned my poor credit rating will hinder our ability to get a shop lease or business bank account. Are there any ways around this given the proposed structure of the business. I am unsure as to how we will be vetted for the lease. Would it be better for instance for me to be a 40% shareholder initially with the investor at 20%, leaving my partner as the sole director at 40%? Being a new business we will not have a credit record so I am assuming they will want to credit score us personally instead of the business. Any advice or suggestions would be most welcome.

 

[mhall]

Are you sure your landlord is going to do a credit check ? - many do not.

If the banks are not lending you any money they will only do the most basic of checks and unless your credit rating is REALLY bad, you should be fine. If not, adjust your strategy and choose another bank

 

[Muscat]

When you say bad credit, are you talking a low consumer rating on Experian or something major like personal bankruptcy etc?

 

[gregosaurus]

I defaulted on a student overdraft of £2000, 3 years ago. I am in the process of attempting to have this removed as it happened accidentally and without my knowledge. This is irrelevant I know as the simple matter is, that it is recorded as a default and has adversely affected my score.

Banks won't be lending us money as we have our £40k startup in savings. I read that for commercial premises if the company is newly formed and has no credit score, then the directors will be checked and/or personal guarantor's sought. I had planned to get around this by making my partner the sole director and myself a 40% shareholder but it has been suggested to me that with that stake in the business I would be checked regardless of whether I was a shareholder or a director.

We are open to paying 6 months of the lease upfront etc, but unsure whether to disclose my situation or try and structure the business in such a way that it won't arise as an issue.

 

[Muscat]

Something like that won't affect your chances of getting the lease, so there is no need to delay appointing yourself as Director. I would strongly advise against signing any personal guarantees though, it is never a good idea and I myself have been badly burned that way when I started out.

With you being a New co. the landlord will no doubt want comfort in rent up front etc., but shouldn't insist on PG's.

 

[gregosaurus]

That is really good to hear. So I should disclose this before being credit checked and you're confident it wouldn't be solely preventative to the lease going through OK? I was under the impression that a default was equivalent to a CCJ etc. My score with experian is 682 and in the 'poor' section. When renting my apartment it caused me to fail the credit check and I had to get my parent to act as a guarantor.

As a side note, although the company is new, we have purchased a successful franchise. I doubt this will makea difference to the check though, as our company is still an independent seperate entity.

 

[Muscat]

Honesty is the best policy, but really something like that will be of little (if any) interest to a landlord worth his / her salt. Also the fact that you have a co-director is good, as he is effectively getting double the comfort. You are also funding with savings rather than debt, i.e putting your money where your mouth is. That is a big plus for any landlord. I took on a £100K p/a city centre 15 year commercial lease with a new co. and some poor credit history very similar to your own. I had to jump through a few hoops but refused to sign PG's and only gave them 3 months rent up front. In the end the landlord believed in my idea and the deal went through. I'm sure you'll be fine.