The need to provide a track record will create a problem for early stage businesses. The overdraft policy should be one of the selection criteria when selecting your new business bank.
There are also other providers in the market supplying unsecured loans. This is where there is no security being offered (like your house, or business premises), but you still need to provide a personal guarantee that the loan will be repaid.
While the personal guarantee part may seem hard, this is really the same basis as a credit card loan so it is nothing unusual in that sense.
It offers the flexibility of you deciding how the debt will be repaid rather than running the risk of your home being repossessed.
The devil is often in the detail. Make sure you fully check all contracts you sign and if necessary have the contract explained by a legal expert.
You should note the level of protection given to business people when faced with contracts with unreasonable provisions can often be less than given to consumers. This is because, in the eyes of the law, business people are regarded as being more sophisticated. In other words it is expected that you will have fully read and understood the contract.
Another approach to managing cash flow is invoice financing. With invoice financing you get paid immediately for the value of your invoices, less a percentage fee from the loan provider.
The benefits of invoice financing are that the loan is very short term and it is based on real business so you are not making speculative projections. This also means the security of the loan is the viability of the invoice. So if your business goes bust, the invoice still stands, but the loan company will use their corporate might to get paid from your customer.
Depending upon your business model, credit control comes with the contract so the overhead associated with chasing outstanding invoices can be reduced or even removed.
For one-off invoices that are not in dispute, this can work very well. For instances where a close management of your customer relationship is required then a little more thought may be required.
You should check the invoice finance provider's policy on debtor communications to assure yourself it will work for your business.
