When running your own business, there may be times when cash flow is reduced. This could be due to an unexpected downturn in demand, increase in costs, shortened supply of products for sale, unanticipated requirement for repairs, or myriad other reasons. In order to keep your business ticking over, an injection of funds might be required. If you are considering taking out additional finance for business purposes, it’s important to know the facts before you commit. In this article, we’ll explore some of your options when securing a cash boost for your business.

 

Short-term business loans

When your business requires a fast injection of capital to deal with temporary financial demands, such as unforeseen expenses, replacement of equipment, or the pursuit of new opportunities, a short-term loan can be the solution. This type of loan usually comes with a short repayment period; two years or less on average. While it is a convenient method of securing quick cash, be aware that short-term loans generally come with a high APR, and you must be confident that you can meet the repayment terms; failure to do so will result in penalties.

Working capital loans

This type of loan helps your business to continue operating, by giving you the financial boost to manage day-to-day expenses such as wages, repairs, new equipment, fixed overheads, securing inventory, or simply pulling the business through a period of low demand. They are intended to be utilised as a short-term fix; as such, APR can be high and the lender may require relatively fast repayment. As is the case with other short term financing options, you should have confidence in the ability of your business to repay the loan and interest in full.

Term loans

If your business requires finance over a longer term, perhaps due to an investment opportunity, the need to modernise equipment, or an expansion of scope, a term loan can be the most suitable solution. Usually, these loans involve a larger amount of money, a more in-depth application process, and a longer, better-structured repayment time. APR is significantly lower than short-term loans, although this can fluctuate over time; you must therefore be prepared in case repayments become more expensive. That said, term loans provide a helpful boost in capital, which you can use for practically any purpose.

Personal loans for business

If your business does not have any independent credit history, but your personal credit score is good, you may be able to apply for a personal loan for business. Of course, it’s generally best to keep personal and business finances separate; if the loan cannot be repaid, for example, it will have a negative impact on your personal credit rating and may jeopardise your own assets. That said, it is an ideal solution for small businesses that require long-term finance and will have the means to repay without difficulty.

Further reading

Whether you are considering short- or long-term solutions to funding gaps in your business, it’s encouraging to know that support is available. LendGenius have put together an insightful blog post regarding help with business loans; check out their post here to learn more.