If your current cash flow isn’t stable, you have nothing to secure against the loan, or you simply have too many debts, you may be at risk of being rejected. Banks are also reluctant to provide loans to businesses with a less than stellar trading history, as they feel it reflects how you would handle their money going forwards. What does your Profit/Loss report look like? It might not be you – due to the current economy, banks now take very careful steps and set high standards for businesses who want to borrow money. They expect to clearly see the market growth for a particular industry, to make sure that there is room for greater demand or a predicted increase in sales. Maintaining a proper business bank account is also important – they need to see you accurately split your spending between personal and business bank accounts. Last, but not least, they are looking for evidence of a stable work force. You need to show strong teamwork and leadership to make sure your business plan is implemented in the right way.
So is this a dead end? Not necessarily. Unsecured working capital loans provide easy cash flow for small and medium business owners like sole traders or partnerships, to manage day to day activities and also to cover a short term investment or even a renovation. Funds can also be sourced from private lenders, wholesale funders, contributory loans and more. Each of these is slightly different in terms of the loan conditions, so a bit of research is needed, and some careful consideration of the pros and cons.
Remember, everything you borrow must be repaid, and is a liability to your business. Borrowing beyond your means might spell financial trouble for your business. A boost here and there is helpful, but too big a loan can drive you deeper into debt.If you want more advice on finding the right business loan for you, we’ve got some links below you may find helpful: