It’s very easy to find lots of well-intentioned advice for small business funding solutions.
What usually happens with such advice is that after lots of reassurances and positive statements, you come across something along the lines that suggests:
- applications start at £10,000 (or similar);
- providers should normally be able to respond quickly and certainly in less than a month or two;
- repayment periods are flexible between 3-15 years;
- you’ll need to provide copies of your audited annual accounts and numerous other references;
That sort of advice and those sorts of providers are fine, though it does assume certain things about the nature of your business. If, in your real life situation, you are a relatively new business with a small turnover and have just hit a very short-term cash flow problem, the solutions touched on above are likely to be useless to you.
That is where the options offered by loan providers such as wonga.com may have an important role to play in keeping your business afloat and allowing you to progress.
Let’s consider a typical scenario.
Your business runs as an extremely tight ship but your monthly budget doesn’t have much fat in it. Suddenly, you discover a hole in the roof of your premises that has to be fixed immediately if your customers and stock aren’t to get rained on. You can get a good deal on the repair but the tradesperson is looking for an immediate payment and won’t offer credit terms.
In such a situation, your business might be put at risk for the sake of just a few hundred pounds. However, by using a provider that specializes in smaller short-term loans, you might be able to get an instant on-line decision and the money in your account within just a few working hours.
Of course, nobody is suggesting that you shouldn’t try your bank. If you have a long-standing and very good relationship with them they might be able to help and it could be one of the more cost-effective approaches to borrowing money.
However, many small business owners today find that banks are focusing much more on larger and strategic lending, with some banks being apparently unwilling or unable to react quickly to more modest demands and requirements.
So, the short-term lenders may have an important role to play in helping to keep a small business going from time to time but any such responsible lender will make one point very clear.
Such loans might be ideal to cope with a short term crisis but they should not be used to hide the fact that your business is struggling to generate the income it needs to succeed. If you find that your business regularly needs to borrow money simply to cope with its day-to-day running costs, then it might be time for a serious and frank discussion with your accountant as to whether it is truly viable.
Such a review may be painful but it might also help you to take corrective action to keep your business profitable overall.