Small business owners – know the facts about short-term loan solutions

Every small business owner is aware of the problems associated with cash flow. Late payment receipts, the need to invest in stock and other problems all dominate the life of anyone trying to run a successful business. Sometimes a loan is the only solution to these problems.


Short term loans

The UK government has recognised the need to support small businesses and according to the website Small, its Start Up loan scheme has distributed £130 million in funds. This aid doesn’t help existing small businesses, and many of these have had to turn to alternative means of finance, including loans from Car Cash Point. This service provides a short-term loan based on the value of your car, and is repayable in regular monthly or weekly repayments.

Talk to your bank first

Before pursuing other avenues of finance, you should always try your bank in the first instance. Unfortunately, it’s often difficult to access funds through this route and an increasing number of business owners have to look at different options.

It’s important to remember that although a short-term loan may still be cheaper than a bank business loan, overdraft and administration charges all mount up. The same criteria apply to borrowing money on your credit card.

Access a loan quickly

For many small business owners, the ability to access funds quickly is a priority. The company balance sheet may look strong, but after several months of delayed invoice payment, even the healthiest of companies may run into financial problems. If you are looking for a short-term loan, don’t be beguiled by appealing advertisements offering attractive interest rates. Choose a loan that offers fixed rate of interest so that you are aware of all of the cost implications.

If you read the small print, you’ll find out that the offer may expensive if you wish to borrow over a period of time or extend your loan. Always be realistic about your ability to repay your loan. Check out if the loan includes early repayment fees. Your company must be registered in the UK to access most loans.

Invoice borrowing

If you have a large amount of unpaid invoices on your books you could always look at borrowing against these assets. An article on the This is Money website suggests that 18% of small businesses which had experienced cash flow problems have turned to this solution in the last five years.

The British Business Bank

Heralded as a solution to help fund small businesses on its inception, this bank doesn’t actually lend directly to small businesses. The bank works together with its partners to supply loans to ‘enable you to access more finance products.’ If you’re looking for a short-term business loan it is worthwhile looking at the British Business Bank website to see if the bank’s partners may be able to help you.

Ask for help

Most businesses are usually aware that they may have to take out a loan, but don’t always know which type of loan will suit them. Ask your local Chamber of Commerce to recommend an independent financial advisor. Don’t select a broker or advisor who’s tied to certain financial products or companies. When seeking a loan you need truly independent advice.

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