If you run a small business, you understand only too well the importance of keeping your finances under tight control. From keeping your personal finances separate to sticking to a concrete budget, there are plenty of ways to manage your money. However, you’ll also know that no matter how prepared you are, unexpected bills pop up at the most inopportune moments. So when your money is all tied up, how do you deal with these bills?
The Bank Overdraft
A bank overdraft is a simple financial product that can be approved almost instantly. If you have a solid record with the bank and a proven track record of paid invoices, your bank’s small business manager should be able to help you out. Unfortunately, most business owners already have an overdraft in place, and if you’ve already hit the limit, then it’s entirely up to the bank to decide if they want to extend it further.
The Small Business Loan
A small business loan from your bank is another option that could see you add much-needed funds to your petty cash. However, most small business loans take some time to get approved, and approval relies heavily on your credit history and score. Additionally, you can look for a private business loan. This is a good choice if planning for the future but not necessarily for that immediate cash injection we’re looking for right now.
The Short-Term Loan
Thankfully, borrowing money from a short-term lender isn’t the same as borrowing from your average bank. Financiers like Spotter Loans are pretty understanding when it comes to credit scores and defaults and most will usually approve loans regardless of your prior financial history. The other plus side to a short-term loans is the fact that it is often approved instantly which gives you immediate access to cash. However, it’s important to note that you will need to repay the loan in a shorter time period so borrow only what you can realistically afford to repay.
The Personal Loan
Keeping your personal and business finances separate is of the utmost importance, but when the chips are down, and you have no other options, a personal loan may be your only choice. Again, you must only borrow what you can afford to repay. Personal loans are usually approved quite quickly but spread out over a minimum of one year. This means that you will have that extra bill to pay for at least the next twelve months which is worth bearing in mind.
The Family Loan
This is the one that we loath to suggest, but we’re giving you options here, and so we should list them all. The family loan is exactly what it sounds like. Asking a family member to make a short-term investment in the business could be a great get-out-of-jail card. However, this can lead to problems and sometimes severed relationships if you fail to repay on time. To be honest, we don’t recommend this avenue of approach at all for a family business.
So which best suits your needs? If you need cash today, then the obvious choice is the short-term loan or the overdraft (if you haven’t got one already). Prepared to wait a few days? Then the small business loan could be the one for you.
As you may have guessed, we’re not fans of the personal loan or hitting up family members for cash. After all, mixing your personal finances and relationships with your business is a recipe that is a little risky. Just remember that whatever approach you decide to take, make sure that you only borrow what you can afford to repay and try to pay it off in the shortest time possible.