Overdraft or credit card

[destone]

Hi everyone,

I am a 'self-employed' through a Limited company that I have set up 4 years ago. I would like to get some extra business finance and I am not sure whether a business overdraft or a business credit card would be easier to obtain (i.e. which one needs a lower credit score?). I am possibly looking at not more than £2,000 -- just to help out my cash flow.

Thanks for the replies.

 

[Talay]

You won't get either if your business hasn't a lot more in the kitty after 4 years than the £2000 you are asking for.

I'm sorry to say that the reason you won't qualify is the fact that you have proven you cannot save the £2000 you now seek to borrow and your history of spending your income suggests you will not repay it.

If your credit record isn't shot to pieces, a personal credit card or overdraft might be possible but as you are asking about low credit scores, I guess you've shot that bolt already.

 

[sprouting]

We see this problem regularly with SMEs.

There is much media interest in SME lending at the moment. However, the main reason for the lack of funding isn't down to the banks being difficult but mainly due to lack of financial awareness, strategy and knowing the business by SMEs. Banks will not take risks at the moment, particularly where the public have a poor perception of them after the 2008 crisis.

You can pitch up to your bank - but be assured, they will want a whole lot of creditable information in written and verbal form. I appreciate the amount is low but they will want to know you have the ability to pay it and its just not a way of propping up your business.

For the medium to long-term, I would consider your strategy including your reserves to ensure you build sufficient amounts for future business development and growth. That will enable you to go to a bank with a good case for lending.

Sprouting always recommends that you keep your bank updated at all times so they have good understanding of your business. Don't just wait until you need them. Those days are gone!

Give it a go for either case but I think they will look more to you personally to bridge the gap in your business finances.

Happy to discuss. Good luck.

Sprouting Team
www.sprouting.co.uk

 

[businessfunding]

Hi everyone,

I am possibly looking at not more than £2,000 -- just to help out my cash flow.

Thanks for the replies.

Is your problem actually cash flow (as opposed to spending more than you earn)?

If so, I would recommend that you look very closely at both your creditor and debtor terms both contractually and how they are applied.
An interesting - and often achievable - challenge here is to improve your cash position by 10% of turnover by concentrating on these areas.

Ultimately, if you cannot improve terms & collection, invoice finance might be the answer for you.

 

[Moneyman]

The self employed by a limited company is a starnge situation.
the easiest would be to get your own credit card and use it to buy stuff for the company and repay yourself from company funds.

 

[gordano]

I doubt the banks will give much if any credit unless they see a profitable business opportunity.

As already commented, a business that has been trading for 4 years applying for £2000 seems to suggest the business is not very profitable unless you have got into a trading difficult with overdue invoices to collect. If the latter you can try selling on your invoices for a percentage (you will find companies online that do this).

 

[Christine Hough]

Have to say I had been trading for 6 yrs, only 3 with HSBC when I asked for 3k overdraft. It went through fine. I was only asked verbally why I wanted it and it was for seasonal fluctuations; turnover had been steadily rising all the while.

I had effectively been offered 1k as soon as I opened the account as a credit card limit.
I soon afterwards added 1k on overdraft.
I also got rid of the cc to have all borrowing in one place on overdraft.

They can see how your account has been running and if a good part of the year it is in credit they seem to be amenable to an overdraft for seasonality.

However I did learn that 3k is the top limit for business unsecured loans.

 

[Jet Virtual]

Definitely can't hurt to try both ...