Business Loans … NOT Credit Cards
Shocking reports show that, within the last 12 months alone, an estimated 1 in 8 businesses have resorted to paying for products, services, and new installations through personal credit cards due to a lack of financial resources. While this may seem like a quick solution, allowing growing businesses the opportunity to grab any opportunities for continued development that may arise, there is one very serious issue to consider – that personal credit cards do not offer the best rates, and that resorting to this form of payment on a regular basis could actually have a significant impact upon operations.
Today, we’re seeing many credit cards being offered with a 6.5 percent APR, although some APR rates can be as much as 11.9 percent, 15.9 percent, or even up to 18.9 percent. This means that for every £1000 purchase a business makes, they could end up paying nearly £1200 back to the bank. Of course, this adds up over time. So why are so many businesses resorting to credit cards? Quite simply, with news that business loans are still difficult to come by following the recession – especially for small businesses or start up enterprises – many feel like they do not have any other choice available to them.
This, of course, isn’t true. There are many alternative business loans available that are not based on APR, and can work out to be a much more sensible financial option for the business. These include:
- Invoice financing
- Peer-to-peer lending
- community shares
- pension funding
Invoice financing is fast becoming one of the most popular forms of alternative business loan. Instead of being based on a fixed APR, it is instead based on an agreed percentage discount on a sales transaction, and provides an upfront payment, usually within 24-48 hours depending on the lender. What does this mean for your business? Well, instead of paying 6.5 percent APR, you will instead be paying a typically much smaller percentage for debt-free working capital that can be used immediately for growth.
Unfortunately, many business are not aware of alternative business loans, and could be digging themselves into a hole by using more dated, more risky methods of funding business growth and development. Business loans don’t have to be difficult to obtain, and compareyourbusinesscosts.com can help you identify the best business loans for your business. Give us a try today!