Often in business it can be considered more productive to seek forgiveness than to ask permission.
This may not be one of those times.
Whilst we all face rapidly evolving circumstances and an uncertain future as a consequence of Coronavirus, first thoughts of business owners and their Finance Directors will often be towards the immediate preservation of cashflow.
For many businesses, asset finance agreements probably represent a significant part of their fixed monthly overhead and will therefore be a prime target for cashflow savings. The Finance and Leasing industry has already recognised this requirement and, after an admittedly stuttering start for some, it is generally responding well to all genuine requests for assistance and forbearance from customers whose accounts are up to date with a clean payment history.
Collectively the leasing companies are currently handling tens of thousands of requests for payment holidays, worth hundreds of millions of pounds, so there is clearly going to be a process to follow. In many cases the lenders are taking upwards of a week to respond.
Right now you will no doubt have many issues to address, but before you take matters into your own hands and cancel your direct debit please be aware that, if you do so before approaching your lender, there is a chance that a payment will be missed prior to forbearance or payment holiday approval.
At that point your agreement will be in arrears, something which may count against you in more ways than one.
Firstly, your request for assistance may not be received in such a positive context.
Secondly, and potentially of greater consequence, the role of the credit reference agencies must also be recognised.
All participating lenders are obliged to inform credit reference agencies when accounts have been put into any type of payment arrangement. However, due to the prevailing extenuating circumstances, all banks, regulators, industry bodies and credit reference agencies are currently holding discussions to agree a structure under which this will not negatively affect credit ratings and future ability to borrow.
Therefore, if you have already taken the action to cancel your direct debit(s) at your bank and you have not yet submitted a request for assistance from your lender(s) – either directly, or via your broker – please ensure that you do so as soon as possible.
Although your request will most likely be successful, you will probably be asked to leave your direct debit in place – if it has not already been cancelled – whilst the lender arranges for suspension from their end.
Over the last three weeks we have been managing rescheduling requests from our customers for hundreds of agreements across a panel of twenty different lenders, all of whom have different measures in place to deal with this. Please understand that this message is intended only as friendly guidance, an attempt to help you avoid unintended consequences. These are challenging times, and any future recovery will be difficult enough without the added incumbrance of an impaired credit rating.