From time to time, a business needs a cash injection. With so many lenders offering a dizzying array of products, it can be difficult to know what to choose.
There are plenty of different types of business finance, but before diving in and applying, it’s important to understand your requirements first, so that a loan can be matched to your needs, and so that you can potentially avoid the problem in the future.
“Do your homework first, because if you don’t, you’re going to commit to the wrong product,” says Hutchinson Financial’s Managing Partner, Paul Hutchinson. “There are hundreds of ways of getting the money, but you’ve got to match those with the purpose.”
The consequences of choosing the wrong finance product include paying too much for finance, or ending up with a loan that simply isn’t fit for the purpose – in this case it may make a problem worse, rather than solving it.
“It comes down to finding out what your real issue is,” says Paul. Work out how long it will take to repay the amount you need to borrow, whether the repayments will impact the business, what has caused the shortfall and whether you need to take any other action.
“A lot of people in need of short-term debt might not be invoicing properly or collecting their debts properly,” says Paul.
Finally, make sure you talk to someone experienced before talking to bank staff, who may not have specialist knowledge of small businesses, or a good understanding of your business and its needs.