Duncan Brown: How to avoid unnecessary hurdles for business lending

Commercial finance brokers can help you avoid unnecessary hurdles. Photo / NZME

Anyone who has approached their bank recently for a loan will have noticed they need to go through a rigorous process.

This is because on December 1, major changes to the Credit Contracts and Consumer Finance Act 2019 (CCCFA) came into effect.

These changes were designed to protect vulnerable consumers from unscrupulous loan sharks and put the onus on lenders to ensure any proposed loan was affordable.

Banks and finance companies are now required by law to check that the information supplied on an application is accurate and to do this, they generally ask for three to six months' bank statements on all accounts and check transactions against your loan application.

But from day one, there were complaints the new legislation was too restrictive, intrusive and unreasonable, resulting in many otherwise creditworthy borrowers having their applications declined.

Earlier this month, the Government signalled changes to the CCCFA to curb unintended consequences, but it remains to be seen how these changes will impact current processes.

Business and commercial lending is not subject to the same scrutiny required for consumer lending and some banks and finance companies choose to specialise in commercial lending to avoid getting caught up in CCCFA requirements. These lenders offer competitive rates and some can even offer "auto" approvals (no financials required) subject to certain conditions.

In summary, any loan application for consumer lending (mortgage, personal car, boat) will be subject to CCCFA requirements but business lending (plant and machinery, work vehicles) may not be.

Mortgage brokers will help you navigate the CCCFA landscape and commercial finance brokers can help you avoid unnecessary hurdles by finding business lending solutions that best suit your needs