Without money, a small business is going to struggle to survive. Unfortunately, there isn’t a bottomless pot of cash at the end of the rainbow. Every time you get to the end it disappears and changes locations. Thankfully, business loans do exist for the entrepreneurs with big dreams but small budgets. Now that you have the cash, you can finally put your money (slash the bank’s) where your mouth is. Of course, because there is an agreement on the table doesn’t mean it is a healthy one. In fact, certain signs are warnings that it’s time to get out, now. These are the ones to watch for.
Not many businessmen or women start a company and sell it within a couple of years. However, like flipping a house, some entrepreneurs try to make a quick sale. After all, there may be a swift profit in there, too. One thing you want to do if short-term ownership is on the cards is to avoid refinancing. The reason is simple – smaller repayments. A great thing about refinancing is the fact that it reduces rates over time while increasing the total amount owed. This doesn’t sound promising, but it has its benefits if you can wait long enough.
What happens when you take out a loan? The majority of the money goes towards satisfying the interest payments. Considering this is how banks make their money, it’s essential to clear the amount before beginning to repay the actual debt. However, when the main interest is done and dusted, refinancing should be on the cards. Why? It’s because it helps the business focus on other debts where the rate of repayment is high. By paying off the minimum balance each month, you can steadily tackle a variety of arrears.
Loan sharks aren’t the only lenders who can make life uncomfortable. Sure, a predatory bank won’t show up at the door with a cricket bat in hand, but they won’t disclose information either. They also use unregulated penalties regarding payments and charge extortionate amounts of interest. In short, there are loan sharks with licences and sharp suits. The good news is that you can use sites such as businesslineof.credit as inspiration. Their policies are in line with regulations so you know what to look out for in a deal. Ask friends for reviews and feedback, too, and check out fca.org.uk.
The majority of the above is a moot point unless you, or the business, have good credit. Lenders won’t facilitate refinancing anything unless they believe you can pay off the balance. To decide whether it is going to happen or not, they check individual and corporate credit scores. Sadly, a low one is an indicator that you are untrustworthy. Experian.com and many others have online tools which can reveal you rating beforehand. Always check it and keep up to date before applying. Otherwise, the score may take a hit.
Have you spotted any of these signs, either recently or in the past?