The loss on business means that in a given tax period the costs of running a business were higher than the revenues it generated. Although the reasons for “being in the minus” can be very different, the bank usually draws one obvious conclusion in this situation – the entrepreneur is insolvent and will not be able to cope with the repayment of the new liability. Importantly, however, there are exceptions to this rule and in certain situations you can keep your chances of a loan despite the loss. What in this case may lead the bank to provide financing?
Adequately high operating income in the current accounting period
The slight loss in the last financial year does not have to close the road to credit, but only on condition that it already generates high income in current operations. It is important, however, whether the loss was of a one-off nature or whether you are notorious below the line – if one-off, the bank will carefully look at the reasons for it.
Poor result due to high investment outlays
Some banks are aware of the fact that the purchase of machinery, land or real estate is an investment that is expected to increase earnings. Therefore, if you have incurred large investment expenses in a given period, they will be willing to provide you with financing; however, you will most likely have to show that previous investment outlays have been beneficial for the company and have supported its development. They use a similar approach for depreciation charges, which are only cost in accounting and do not diminish your financial capabilities.
High income from other sources
The fact that when calculating creditworthiness, the bank takes into account all documented sources of income may also work in your favor. So if you have incurred a loss as part of your business, but earn enough, e.g. on a full-time job, renting a flat or even under civil law contracts, you have a chance for a positive credit decision. Of course, additional income will have a positive impact on the assessment of your application also when your business is in the black.
Co-borrower’s high income
You can also improve your situation by taking a loan with an additional applicant, for example a spouse or parents. In this case, the amount of co-borrower’s income and the amount of business loss suffered will be important.