Harris KhanBusinesses around the world go through ups and downs and as a business owner it is crucial you are able to ride the storm when it comes, as well as understand your options when you might need help or assistance. One of the most common areas in which a business of any nature needs help at one time or another is that of funding and cashflow.
No business, anywhere in the world is immune from potential cashflow troubles.
Traditionally, it was much easier for any company or business to seek a loan from the bank or a traditional, run-of-the-mill money lender. However, in recent times, companies and their owners have turned to everything from payday loans online to second charge mortgages and more besides.
No matter where a business owner seeks the money they need to get their business back on its feet, it is important that before committing to any option they understand what options they do have at their disposal.
Business Loans
Understandably, business loans are made for the specific needs and requirements of businesses. This means that the lender or broker in questions should understand and be aware of common business challenges. Additionally, a business loan, being tailored to a business and what it needs will also tailor repayments and any other terms to business unlike most other loans.
These loans can also be for larger amounts than the likes of unsecured personal loans, but they can take some time to go through and be processed.
Business loans are not typically secured against anything but should the business default on the loan and fail to make their required repayments, it may harm the credit potential of the business in the future, affecting any further applications for loans or credit.
Secured Loans
Secured loans by their nature require a high-value asset against which the loan is secured. The asset acts as a form of collateral. Thus, if the borrower fails to make their repayments and meet the terms of the loan agreement, the lender can go to the courts and seize the asset in question via a repossession order.
Importantly, when it comes to secured loans, business owners and those seeking the loan should be extra careful before applying, as if they miss repayments and a repossession order is issued, they may lose a high value asset.
These loans will typically be secured against either a property, like a house or apartment or a vehicle. However, in some cases these loans may be secured against another high value asset like a piece of artwork or valuable jewellery. With regards to the likes of first charge mortgages, you will ned to monitor the Bank of England’s interest rate, as this will at least in part, determine the cost of the loan and its interest over time.
Unsecured Personal Loans
These include the likes of payday loans and other loans which are not secured against anything, to act as collateral.
Therefore, these loans will usually come with higher-than-average interest rates. Because these loans are designed for higher risk borrowers and because they are designed with speed and ease of application in mind, they will tend to be more expensive than tailored business loans and even secured loans in some cases.
Although you can in theory take out any type of personal loan and use the money for the business requiring the funds, it is usually advisable to see these loans as a last resort and a real emergency lever to pull if such circumstances do occur.
Family and Friends
This should never be overstated. Going to family and friends for the finance needed for a business, be it to get the business off the ground or perhaps to help keep it afloat, is something that should always be considered. It is more than likely that your nearest and dearest will want to see you and your business succeed and so will be willing to lend you some money for it.
However, be cautious as mixing money with family and friends can cause other issues and late repayments are likely to put a strain on any relationship or friendship, no matter how strong.
That said however, when it comes to borrowing money from family and friends, they should be one of the first ports of call, particularly if you do not need large sums of money, as they will likely come with little to no interest and will be much more understanding towards your needs and concerns.
