On Monday I wrote about why cashflow is something you need to watch, however small your business may be. In fact, poor cashflow can kill an otherwise healthy business.
Since the recession hit us a few years back, all the talk has been about customers not spending enough. But if they do place orders and then don’t pay up on time, you still have a major problem.
Payday loan providers Wonga have recently launched Wonga for Business. This works in a similar way to Wonga’s payday loans except it is for business use rather than for personal use. So if your client is slow to pay you but your business has debts of its own to pay, then a Wonga loan could keep your business afloat until your client does give you the money they owe you.
The Wonga for Business website is very transparent and tells you how much interest you will have to pay for any amount you would borrow (up to £15,000 for your first loan) and how long you would have to pay it back. It’s a short-term loan service, so interest rates are high but you could have the money in your bank in as little as fifteen minutes.
you could have the money in your bank in as little as fifteen minutes
My feelings about these loans are mixed. On the one hand Wonga is simple and fast to use as well as being transparent. And if one late payment from your client means it’s a choice between having to close your business or take out a short-term loan, then it’s definitely worth giving the loan some thought.
But here’s my concern. If that late payment from your client still doesn’t show up, you could be in even deeper trouble. Wonga’s own website says ‘if you have doubts over whether your business will be able to repay a loan comfortably, please don’t apply in the first place.’ Which sounds sensible, but if you are owed money by a client you don’t have much control over whether they pay up or not.
I learned this the hard way when I lost money when one of the companies I freelanced for went into administration. These days I don’t consider the money mine until it’s in my bank account.
Of course, if your business is one late payment away from collapse, then you really do need to do something about it right now. Step up your marketing efforts, add another product or service, put some savings aside or stop relying so heavily on one client. Do everything you can to avoid getting into a position where you have no choice but to take out this type of loan. There’s more advice on improving your cashflow in my article.
If the poo was really about to hit the fan, would you consider a loan like this? Drop me a comment and let me know.
You can read more about Wonga for Business here.
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