It is generally agreed that Business loans have a useful part to play in our management of everyday business finances – but only when used responsibly and with all due caution regarding the need for the loan in the first place, exactly how much it is going to cost you, and your absolute confidence in being able to make the repayment when it falls due. A small business accounting service can help.
Of course there are likely to be times when we might all welcome a little extra cash – but there is a difference between liking it and needing it.
As the government funded Money Advice Service points out, there are some things we may like, but simply cannot afford. These might include:
- tickets for concerts or sporting events
- new work suit or new computers and software
Expenditure in the face of an emergency – such as essential repairs to your car – however, might help you avoid further costs in the future and, therefore, warrant the short-term commitment to a Business loan.
Some commentators make even more clear their dislike of Business loans as a matter of principle. The popular finance website, Money Saving Expert, for example, has little good to say about this form of borrowing.
But the criticism is based largely on two factors: the seemingly high cost of borrowing when measured by its APR (annual percentage rate) and the failure on the part of some lenders to conduct their business with a transparency on which customers may safely rely.
However, in the case of lenders for example, the APR might well be high but it is important to keep in mind that this APR is a reflection of the annual interest rate, including compound interest. In reality, of course, a short term Business loan is only for one day or a maximum of 30 days (with a shorter repayment term paradoxically reflecting a higher APR). The loans also include a flat fee of £5.50 to help cover the costs of the lender’s fast transfer of funds to borrowers’ bank accounts.
Indeed, Wonga make it a central point of principle that all of the information on its website and all aspects of its lending are totally transparent – whatever the tricks, ruses or deceptions that some critics may level at other lenders.
It may seem obvious to point out that any kind of loan – including a Business cash advance – needs to be repaid when repayment falls due. Responsible borrowing, therefore, requires your 100% certainty that you are going to be able to repay your Business loan in accordance with your loan agreement – and without recourse to repaying one loan by taking out yet another one (the perils of which are discussed in greater detail in this article in Investopedia).
Provided you exercise due care and are responsible in your borrowing from reputable lenders, therefore, there seems every reason why the occasional use of short-term cash advances may play a part in normal, everyday personal finances.