5 Signs You Need a Bridging Loan ASAP
Spot the tell-tale signs that your business is experiencing serious cash flow problems requiring immediate access to cash through a bridging loan.
Late payment of supplier invoices
When you don’t pay your supplier on time, they may claim interest and debt recovery costs from you. So, whenever your business starts paying late for goods or a service, or always exceeds the 60-day period for business transactions, it may be time to look for the right financing.
The supplier may charge an interest which could be up to 8% or more plus a base rate, or as stated in the contract. For example, if your business owes $1000 to Supplier X and the base rate is 0.5%, you may incur an annual interest of $85. Supplier X can also charge you a fixed sum for the cost of recovering a late payment on top of claiming interest from you.
When you’re facing this issue, it is important to make the payments right away. Apply for a bridging loan with a reliable lender and negotiate possible reduction of interest with the supplier. Moving forward, it is advisable to find time to review the supplier payment terms on a regular basis to help you manage cash flow with ease. You can discuss payment terms with your suppliers, with regards to extending the payment days and starting the payment term upon complete delivery.
Late payment of taxes
If your business has a tax debt you are unable to pay on time, it is important to take out a loan so you can make an arrangement for payment in full or by instalments. Otherwise, you may have to pay a general interest charge, shortfall interest charge or penalties if you don’t pay the correct amount of tax on time.
The tax office may add interest charges on your taxes to ensure fairness to those who have paid their tax on time. It will also lessen the impact on the community of late tax payments.
Late payment of superannuation fund
When you have serious cashflow issues, you may not be able to fund the superannuation on time. Superannuation is the government’s arrangements of assisting employees accumulate money for their retirement. If you cannot make the minimum compulsory superannuation contributions for your employees on top of their wages and salaries which is 9.5 percent, you may be in a deeper trouble. Remember that superannuation contributions are income invested over the period of time while the employees are working and are paid to them upon retirement. However, the government allows access to their preserved benefits when the employee is experiencing severe financial hardship or requires medical treatment, and similar circumstances.
Late payment of wages to your employees
Review your payroll. Do you have fulltime employees? If so, have you been paying them late every month? Or, did you pay them in installments instead of full payment each month?
The employees can charge you an interest for late payments of their wages and salaries and could claim compensation for a certain amount. Review what your contract says, and if it states that you will pay the employee a salary of how many dollars a year in equal monthly installments in arrears on the last day in each month—make sure that you abide by the contract.
Failure to pay your staff on time is an indicator of underlying cash flow issues. However, that’s not how it would appear to your employees. It is a breach of employment contract, especially if the date of payment is specified in it. They could also file a small claims suit which in turn would award them the financial losses they incurred directly from the late payment. Of course, many employees would not resort into this, unless they want to lose their job right away. But, there is nothing wrong in settling the issue before it turns serious.
You are stressed out
Are you experiencing undue financial stress because of a large amount of debt or other payment issues? No matter how financially responsible you are, an unexpected expense could still send you in a financial turmoil and shake your budget. Situations like these would appear like a slippery slope for entrepreneurs, but if you have access to bridging loans, you may not feel the strong impact of sudden financial crisis.
Financial stress can affect your personal life and your loved ones. It can cause anxiety and depression and may affect the way you run your business.
If you are behind financially, don’t feel discouraged. Whether the stress is caused by insufficient money management skills or inability to gain your expected profit, you need to understand that there is something that you can do about it. Stressful situations don’t define you—it is the way that you deal with them that does. Instead of worrying about your finances, look for a specialized lender that would provide you with the right amount of bridging loan to help you overcome serious financial situations.