When you are running a business and finding that your earnings are low, it can be tempting to look around for a financing solution when business is slow.
There are many options out there, but it will depend on your credit rating as to what is available for you.
Some options are also more sensible than others and it is important to make sure that you make a wise borrowing decision.
Getting a personal loan to pay for your expenses when your business is slow is a big mistake. A business loan is secured against the business and so if the business goes down it can be made bankrupt and the loan will be sorted out.
If it is a personal loan, you will be personally responsible and may be forced to sell your house in order to pay it back. It can be easier to get a personal loan and there are even some, like payday loans which need no credit check but do not be tempted by them.
It can be very tempting to use a credit card to pay for things when business is slow. Many businesses have credit cards and many people have personal cards as well. It is not wise to use either of these types of credit cards to finance a business. The interest rates are very high and with no pressure to pay back what is owed, the debt can hang around for a long time and cause problems in the future. It also makes any purchases very expensive.
Borrowing from family and friends
It is sometimes very easy to borrow from friends and family when your business is slow, however they may give you the money assuming that they will get it back. You may take it assuming that it is an investment in the business. In the end you could find that there is no money to pay them back and they are not happy about it. It could spoil your relationship with them and that is never worth it.
Some business accounts offer an overdraft facility. These can seem very useful, but they can be expensive. If you agree an overdraft amount, then you will not have fees but just be charged monthly interest on what you have borrowed. This could be very high. If you go over the agreed overdraft amount, then you will start being charged fees, which could be added to the amount owed on a daily basis. This can get expensive, very quickly.
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