When a company is indebted to multiple creditors and has a history of being late on repayments, the chances of being approved for any type of loan can seem slim. To make matters worse, sometimes cash flow is the only thing that is needed to facilitate a recovery, yet the unfortunate past of the business prevents it from getting the funding needed to invest, expand, and escape debt. Without an ideal credit rating you’ll probably have to resort to using the company’s assets as leverage in order to persuade lenders. Consider the following 4 ways to obtain emergency business funding despite poor credit:
1. Secured Loans
Many lenders don’t care about your history as long as you have something of value that can be used as collateral. Does your company own any equipment, inventory, or other assets that you would be willing to take a loan against? Keep in mind you would lose this property if you were to default and/or violate the terms of the loan agreement.
Although secured loans will typically carry higher interest rates than urgent business loans given to a company with exceptional credit, and you’ll have to take the risk of losing whatever asset you’re using as collateral, it may be the only way to raise the money needed to make a crucial repayment or capitalize on a one-time investment opportunity.
If you have assets that you’re willing to sell you could liquidate them and then use the proceeds as your emergency funding. To make the process or marketing and selling the assets, instead of handling it independently you could appoint a licensed insolvency practitioner as the administrator of your company and they could perform a partial liquidation.
Although the term “liquidation” is often associated with bankruptcy, the fact is, you can liquidate some of your company without going out of business, and doing so may be the wisest course of action.
3. Invoice Discounting
If you have clients that owe you money through unpaid outstanding invoices you may be able to turn these future payments into cash by selling the invoices to a financing company in a process known as invoice discounting. Your credit would not be a factor as you would only need to show them that your clients have faithfully made payments in the past.
The lender would only give you up to 85 – 90 percent of the value of the invoice as a loan, and you would have to pay interest as well, so there is a nominal price to pay for being able to access an invoice or contract payment in advance.
Though not to be confused with invoice discounting, Factoring is similar to invoice discounting in that it is a way to get a cash advance on your accounts receivables, but it is different because instead of giving you a lump-sum loan it provides access to a line of credit that is equal to up to 90% of the money owed to your company in invoice payments. The factoring company would then collect and process your client’s invoicing payments. Like a credit card, you don’t necessarily have to withdraw the entire line of credit, and you only pay interest on what you borrow.
Whether you have a great credit standing or are struggling to survive in the current economy, there are ways to obtain urgent business loans with the right security. You may also seek funding which entails selling assets, so don’t despair because emergency funds are available if you know what’s out there and where to look.
Bio: Katie writes across all matters of business insolvency and has covered guides and useful content relating to Business funding, Tax and Vat as well as more detailed information relating to business rescue solutions such as pre pack administration and company voluntary arrangements.
Debt, Personal Finance