It requires a good amount of knowledge about how loans work and how changing interest rates can affect your bottom line. Read this list of tips to figure out what you need to do.

Find Proper Channels 

When it comes to borrowing money, it's important to be responsible and find the proper channels. People from all around the Land of Indigenous Malay are looking for a reliable personal loan company in Malaysia to be sure everything will be up to code. With so many options available, it can be overwhelming to know where to turn. 

However, taking the time to research and choose a reputable lender can save you a lot of trouble down the line. Look for lenders that are transparent about their fees and interest rates, and who provide clear terms and conditions. It's also a good idea to read reviews from previous borrowers to ensure that you're making the right choice. By being diligent and responsible in your borrowing, you can avoid any potential pitfalls and maintain financial stability.

Compare Options 

When it comes to borrowing money, it's important to be responsible and fully informed of your options. One way to do this is to compare the different options available to you. Comparing can help you choose the loan or credit option that best fits your needs and budget. By doing so, you can avoid getting into a financial situation that you can't handle. 

It's important to not only consider the interest rates but also the fees, repayment terms, and penalties for late payments. This way, you can ensure that you are making a wise financial decision that will benefit you in the long run. Remember, taking the time to compare and research your options puts you in control of your finances.

Know Your Capacity 

You always need to keep your finances in check, but occasionally, an unexpected expense or an exciting opportunity can leave you in need of a little extra cash. That's where borrowing money can come in handy, but you must be aware of your financial capacity before taking on any loans or credit. This means understanding your financial limits, taking into account your income, existing debt, and other commitments. 

By taking the time to assess your capacity, you can make informed decisions about the finances and ensure that you only borrow what you can realistically afford to repay. Being responsible when it comes to borrowing money isn't just about protecting your finances, it's also about safeguarding your future financial well-being.

Fix Your Credit Score 

Managing your credit score is an essential aspect of responsible borrowing. With the world primarily running on it, a bad one can turn out to be a significant hindrance when applying for loans or credit cards. Here's how to fix this situation: 

• check your report
• pay bills on time
• reduce credit card balances
• don’t open too many accounts
• dispute errors on credit reports
• seek financial counseling
• be patient

It is, therefore, crucial to strive toward fixing your credit score. Fixing a credit score may seem daunting, but it's relatively easy when you understand what determines your score. These tips will help you gradually improve it. Having a good credit score is an excellent way to take control of your finances and borrow money responsibly, making it a valuable investment for your financial future.

Understand The Agreement 

If you're considering borrowing money, you must understand the terms and conditions of the agreement before signing on the dotted line. Doing so isn't just about being financially responsible, it's also about protecting yourself from potential pitfalls down the line. To truly comprehend the finer details of any loan agreement, take the time to read through it word for word and ask questions if anything isn't crystal clear. 

By understanding every aspect of the agreement, including interest rates, repayment terms, and any penalties or fees associated with late payments, you'll not only be able to make informed decisions. Additionally, you'll also have peace of mind knowing that you've taken responsibility for your borrowing.

Hire Help 

Another great way to be more responsible with a loan is by hiring proper help. Whether it's a financial advisor, accountant, or even a personal assistant, having someone to assist you can make a world of difference. They can help you make a budget and stick to it, keep track of your expenses, and ensure that you're meeting your repayment obligations. 

By investing in help, you're showing that you're serious about paying back the money you've borrowed and taking responsibility for your financial situation. Plus, you'll have the peace of mind of knowing that you have someone in your corner, cheering you on and helping you reach your goals.

Be Timely 

When it comes to borrowing money, paying it back on time is not just a nicety, it's a key part of being responsible. No one wants to be known as the person who always pays back late or forgets about their loans. Being timely demonstrates that you value the other person's time and money. 

This also shows that you are organized and trustworthy. By being timely, you'll not only maintain a good reputation but also build trust with your lender. So, the next time you borrow money, remember that being timely is the way to go.

Create A Backup Plan 

What many fail to consider is the importance of having a backup plan in case something unexpected happens. Creating one shows that you are not only responsible but also proactive in protecting yourself and the lender in case of any unforeseen circumstances. 

This plan could include factors like having an emergency fund, considering insurance options, or even having a secondary source of income. By planning, you can ensure that you are not only able to repay the loan but also prepared for any potential setbacks that may arise.

Borrowing money can feel daunting and complicated, but the amount of preparation required and the overall level of attention is important if you’re looking to do it responsibly. You should be patient when comparing your options, as well as make sure that you address any necessary criteria to increase your chances of being approved. Knowing what you are signing is also key; read through all documents with care and ask questions if there’s something that’s not clear. Don’t forget to create an appropriate backup plan just in case things don’t work out as planned. Finally, when the time comes, make sure to maintain a good payment history — this will help you build trust with creditors for future endeavors. 

However, this means of attaining quick money can turn into debt even faster if you’re not familiar with the workings of payday loans in your country. In this article, we’ll introduce you to payday loans, touching upon what they are and how they work so that you can avoid becoming a victim of the debt trap. 

What Is A Payday Loan?

A payday loan refers to a loan borrowed by a third party that has a high-interest rate and needs to be paid back in a short period of time, typically in a two-week payday cycle. The loan is dependent on the amount of income you earn, with the borrowing limit being half of your net monthly salary in most provinces. 

This is because many individuals are paid by their employers on a bi-weekly basis, and payday loans are there to pick up the slack until your next payday. By this time, you are expected to pay off the whole loan, the interest rate on it, and any other fees altogether. 

Getting A Payday Loan

Getting a payday loan is not a complicated process; all you require is a job, your identification information, a bank account, and an approved permanent address. However, sometimes you can obtain this loan even if you don’t meet certain requirements as some lenders are not strict about it.

You’ll either receive cash in hand, have money deposited straight into your account or the lender will provide you with a prepaid card for use. The prepaid card has the disadvantage of requiring an activation fee to be paid for it to work. 

When it’s time for you to pay back the loan, the money will either be directly withdrawn from your bank account, or a post-dated cheque given by you in the beginning to the lender will be cashed out. 

Paying Back Payday Loans

Limited credit choices mainly drive individuals to seek out a payday loan in the first place. There are a few ways you can go about paying back your payday loan: you can check whether you are eligible for a personal instalment loan to pay off the payday loan and other high-interest debt that’s been burdening you since the repayment term is longer.

In case your bank refuses to lend you the money, you can turn to a private or subprime lender. Though they’ll most likely offer higher rates on the payday loans than your bank, it’ll still be far less than your collective payday loan

Endnote

A payday loan is meant to be a short-term solution. There are many reasons one might apply for a payday loan, but this type of loan should be approached with caution, especially if you think you’ll have a hard time paying it back on time. It’s important that you think through your decision before taking out a payday loan since interest rates are extremely high and can cause you a lot more trouble than it is worth.

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But there will always be times when turning to conventional banks for support is not the way to go. In fact, mainstream lenders can be surprisingly inflexible when a borrower’s needs cannot be met by any of their standard ‘off-the-shelf’ financial products.

In each of the following instances, in particular, it may be practically impossible to secure the financial support you need from a mainstream bank or lender.

1. When time is a factor

Borrowing significant sums of money from a conventional lender typically means enduring a near-endless application and underwriting process.  Average mortgage underwriting times are currently around 12 weeks, rendering time-critical purchases and investments out of the question.

By contrast, a bridging loan for purchasing a property can often be arranged within just a few working days; ideal for taking advantage of property purchase opportunities that will not be around for long.

2. When looking to borrow money short-term

Most of the products and services offered by banks are relatively long-term in nature. This is particularly true when it comes to loans and mortgages, where early repayment paves the way for penalties and other transaction fees.

On the specialist lending market, funds can be raised for any purpose over periods of anything from one week to several years. If you would prefer to repay your debt as quickly as possible to save money, you can do just that.

3. When your credit history is not up to scratch

The overwhelming majority of mainstream lenders turn away applicants with poor credit at the door. Unless you have an excellent credit score, you can forget about qualifying for a mortgage, an unsecured personal loan or any other consumer credit facility.

Bridging lenders adopt a different approach, wherein applications are judged on the basis of their overall merit. Even with poor credit and/or a history of bankruptcy, it is still possible to qualify for affordable bridging finance.

4. When you cannot provide proof of income

Likewise, if you cannot provide formal proof of income and your current employment status, you are highly unlikely to qualify for any conventional financial product available from a mainstream lender. Irrespective of the size or nature of the facility you need, your application will not even be given fair consideration. Elsewhere, secured loans from specialist lenders can often be accessed with no proof of income required, and no evidence of employment status necessary.

5. When you want to buy a non-standard property

The mortgages and property loans issued by mainstream banks are typically restricted to the purchase of habitable properties in a good state of repair. Purchasing rundown properties to be ‘flipped’ for profit is often out of the equation, as they are considered unmortgageable.

Consequently, property developers and investors tend to seek support from development finance specialists and commercial bridging loan providers; both of which are willing to lend against almost any type of property, irrespective of its condition at the time.

Businesses use invoice finance as a means of raising capital without giving up equity or other collateral, and it's also the only form of business loan available in many markets across the world. This guide will help you understand what business invoice finance is, how it works, and whether or not this business funding option could work for your business. 

What is invoice finance and how does it work?

Invoice finance (also called accounts receivable financing) is a type of finance that allows businesses to borrow money against the money they are owed from customers. Banks and other lenders are often unwilling to lend to small businesses because the business's credit history is not as strong as a bigger business. Invoice finance allows businesses to get the cash they need by borrowing against the invoices they have already sent out. This means that even if the business has not yet been paid for the services or goods it has provided, it can still get a loan based on those invoices.

The lender will advance a percentage of the total invoice value to the business, and then collect repayment plus interest once the customer pays their invoice.

The benefits of invoice financing

Invoice financing can help your business by providing quick and easy access to cash. This type of financing allows businesses to borrow money against the value of their outstanding invoices. This can provide a much-needed cash infusion when you need it most, helping you to grow your business and maintain liquidity.

Business invoice finance can also help you improve your company's cash flow by accelerating the collection process on outstanding invoices. Funds are typically available within 24 hours of submitting an invoice for financing, so you can get the working capital you need quickly. And because there are no lengthy application processes or credit checks involved, this type of financing is a great option for businesses of all sizes.

How to get started with invoice finance

Getting started with invoice finance is quite easy. First, you need to find a reputable company that deals with business invoice finance lending. Next, the application process needs to be completed which includes providing personal and financial information relevant to your creditworthiness. Thirdly you will receive an email confirming acceptance into their program and once approved they will send you detailed instructions on how to use the service in exchange for an agreed down payment at closing plus interest over a time period dictated by terms of agreement upon purchase or lease agreements made prior to invoice finance transaction taking place.

Why should you choose to invoice over other funding options?

Invoice financing is a type of short-term loan that can be used to cover current expenses. It's also an excellent way to finance new or expanding businesses, as the funds are provided on an invoice basis with no collateral required. The lender doesn't care about your credit rating, so you don't need to go through the hassle of applying for a conventional loan. You'll get your money quickly and easily without any fuss — just how it should be.

Businesses who use invoicing financing often find themselves with more cash on hand than they had before because they're able to get quick access to funds when needed without having too much debt hanging over them at any one time. 

What are the risks involved with invoice financing?

The risks involved with invoice financing are typically the same as any other form of business credit. The lender will want to know what you plan to do with the money, and there may be some restrictions on how it can be used depending on the terms of your agreement with the lender. There is always a chance that an invoice won't get paid, which could result in liens being placed against personal property or even bankruptcy if it's a corporation.

Between April and November, borrowing dropped to £136 billion, down nearly £116 billion in the same period of 2020, according to data from the Office for National Statistics. 

However, the figure was still nearly three times its level two years before, prior to the coronavirus pandemic. The Chancellor of the Exchequer, Rishi Sunak, is currently under pressure to come up with new measures to support the hospitality sector which has been hit hard by the emergence of the Omicron variant of the virus. 

"These data predate the recent surge in coronavirus infections caused by the Omicron variant, with a near-term tightening of virus restrictions once again a possibility," said Bethany Beckett of Capital Economics.

"Although the economy has got better at coping with restrictions with each new wave, we still suspect it would prompt a deterioration in the public finances via lower tax revenues and the potential reintroduction of government support schemes."

In the last year, around 9 million found themselves increasing their borrowing to tide them over for another month or two. Borrowing money from family and friends is often the most common form of borrowing and can often be interest-free and without any credit scoring or approval process. But it is important to understand the pros and cons since money between family and friends can compromise relationships. 

Pros Of Borrowing Funds From Family And Friends

Borrowing money from family and friends can often be a good idea when you need funds urgently. When unexpected circumstances do arise, family and friends may offer to support you out of goodwill and will often be able to help out quickly, providing you with whatever you need for the time being. Borrowing from family and friends also means you won’t be forced to pay back extra on your loan, as you may have to from a bank, payday lender or credit union. 

Banks and other lending facilitates often charge ridiculously high-interest rates, meaning that you risk not being able to repay the money borrowed within the pre-arranged time frame, therefore paying additional interest and being trapped in a vicious cycle. This can then lead to excessive debt, meaning that it was not worth borrowing the original money in the first place.

Family and friends may also encourage you to pay them back what you owe quickly, as they don’t want to risk not having their money returned. Consequently, borrowing from those around you may entice you to repay the funds as you don’t want to be in debt to people you see on a regular basis, whereas borrowing from a bank or large institution might mean you feel less pressure to repay the money as you don’t know where it has come from.

 Some families also lend their relatives money without the requirement that they ever pay it back. Many parents and grandparents set funds aside, saving money to pay for their children’s education, weddings, cars and house deposits. This can save their family from taking out loans with interest rates in the future and provide financial support through more difficult times.

Cons Of Borrowing From Family And Friends

Whilst family and friends may offer financial support in a time of need, it may not always be the best solution. Close relations may not demand that the money they have lent you should be repaid, leaving you feeling guilty and not wanting to ask them for financial aid in the future. 

“If repayment terms are too loose,” explains John Gauthier of Hoopla Loans, “this can create an uncomfortable atmosphere, with people expecting repayment within a certain timeframe. Things can get tricky if you do not repay when expected or if you cannot repay at all, this makes things extremely awkward. 

“Make no mistake, when it comes to money, things can get very tough even between close family members.”

Borrowing from those around you can also create animosity if you are embarrassed to explain your financial situation to them and ask for help. They can also refuse to lend money, leaving you with no option but to take out an alternative loan.

The Bank of England issued a letter to banks on Monday morning asking how ready they were for interest rates to fall to zero or negative values.

In the letter, titled “Information request: Operational readiness for a zero or negative Bank Rate”, BoE deputy governor Sam Woods told recipients that the bank was “requesting specific information about your firm’s current readiness to deal with a zero Bank Rate, a negative Bank Rate, or a tiered system of reserves remuneration – and the steps that you would need to take to prepare for the implementation of these."

"We are also seeking to understand whether there may be potential for short-term solutions or workarounds, as well as permanent systems changes," if banks would face technological challenges from an interest rate inversion, Woods continued.

In March, the BoE cut its interest rates to a record low of 0.1%, where it has since remained, owing to the continued impact of the COVID-19 pandemic. However, there has been speculation in recent months that the rate could turn fully negative, with the BoE raising the possibility in internal communication but insisting that there were no plans to resort to these measures “imminently”.

The UK would be following in the wake of countries like Japan and Switzerland if borrowing costs were cut to such a low figure. It would also mark the first time in the BoE’s 326-year history that negative interest rates have been adopted.

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The BoE set a deadline of 12 November for recipient banks to respond to the letter – a week after its next monetary policy announcement.

While emerging from 10 Downing Street on Wednesday, chancellor Rishi Sunak’s notes were caught by cameras ahead of a meeting with newly elected Conservative MPs.

Among the phrases glimpsed was a reassurance that there would not be “a horror show of new taxes with no end in sight” as the country seeks to overcome its short-term financial challenges.

Recent opinion polls have seen the Conservative Party’s lead over the Labour Party beginning to narrow, giving rise to concerns among Conservative MPs who won seats from traditionally Labour-voting areas – the so-called “red wall” – regarding the government’s policies. An unnamed “red wall” Conservative said that U-turns regarding the wearing of face masks, school meal funding and A-level exam results had made MPs in marginal areas “jittery”, according to the Press Association.

Anxieties have been heightened by the COVID-19 pandemic and the costs it has incurred through government interventions, driving predictions that corporation tax will be raised in order to compensate. The government has thus far dismissed this as “speculation”.

Chancellor Sunak’s statement, which was to be read out in Parliament in an address to Conservative MPs elected in 2019, offered reassurances that the government “will be able to overcome the short-term challenges."

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"Now this doesn't mean a horror show of tax rises with no end in sight,” the statement continued. “But it does mean treating the British people with respect, being honest with them about the challenges we face and showing them how we plan to correct our public finances and give our country the dynamic, low-tax economy we all want to see.”

The chancellor also noted during his address that unlimited borrowing cannot be the solution to government expenditure. "We cannot, will not and must not surrender our position as the party of economic competence and sound finance," he said.

The Bank of England announced on Thursday that interest rates would be reduced to 0.1%, their lowest ever level, in an attempt to limit the economic damage of the ongoing coronavirus epidemic.

This latest cut to interest rates follows only a week after their reduction from 0.75% to 0.25%, and is accompanied by a raft of further emergency measures.

The Bank also announced its intention to increase its holdings of UK government and corporate bonds to £645 billion – an increase of £200 billion from its current holdings and a significant injection of money into the UK economy.

Dr Kerstin Braun, President of financing body Stenn Group, described the timing of these moves has come as a “a surprise”, as they follow only a week after Chancellor Rishi Sunak proposed a significant stimulus plan to shore up the UK economy, and three days after Andrew Bailey took over leadership of the Bank of England from its previous governor, Mark Carney.

“The Chancellor has only just announced a huge £330bn rescue package for businesses and it will be too soon to see any real effect”, Ms Braun said.

This sense of surprise has been shared by market observers. “Not since the Second World War have we seen so many emergency actions taken by the country’s leaders”, Paresh Raja, CEO of Market Financial Solutions commented.

The Bank of England’s statement acknowledged that the economic shock resulting from the coronavirus epidemic was likely to be “sharp and large”, but likely to be temporary.

“The Bank will issue further guidance to the market in due course,” the statement concluded.

Prolonged repayment duration, higher loanable amount, and efficient application are a few among many reasons why people tend to opt for personal loans. Before going through to its other advantages, it is crucial to know the most common types of installment loans.

Types of Installment Loans

Auto Loans
Auto loans are a kind of installment loan that’s meant to be applied when planning to purchase a car. Typically, this type of loan is repaid within a range of 12 to 96 months. Take note, however, that not all lenders have the same duration of monthly payments. Usually, loans with a longer-term repayment come with a lower interest rate, while loans with a shorter repayment term have a higher interest rate.

Mortgages
If auto loans are for buying cars, mortgages are for purchasing a house. Most mortgages usually have a duration of 15 to 30 years of repayment, as well as a fixed interest rate and set monthly payments that often don’t change.

Personal Loans
Personal loans can be used for a variety of purposes. You can get this loan to consolidate your debt, pay off sudden bills, or finance a major purchase. Typically, personal loans should be repaid within 12 to 96 months. One downside of personal loans is that they come with a high-interest rate as lenders don’t usually require collaterals, unlike auto loans and mortgages.

Advantages of Installment Loans

As stated earlier, there are several reasons why a lot of people prefer installment loans than any other kind of loan, including repayment duration, higher borrowing limit, and efficient application as some of its benefits. Specifically, here’s a roundup of the reasons why an installment loan can be the best for you.

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Higher Borrowing Limit

Because installment loans offer a more extended repayment schedule, banks and other lenders can give you a higher borrowing limit. This is an amazingly good advantage when you’re in need of a big amount of money, especially during emergencies. Plus, a larger borrowing limit removes the possibility of applying for multiple loans in the future.

Quick and Easy Application

The application for an installment loan can be either personal or online. Most people prefer applying online because of its fast and offers an immediate response not so long after the application. Take CreditNinja, for example. They offer a software application intended for borrowers, which can be awesome for people who don’t want to leave the comfort of their home.

Quick Cash

Many lenders offer a quick credit check that makes the process and approval quicker. Once you get approved, they will deposit the funds directly into your bank account as soon as possible. They also offer flexible repayment terms, depending on the type of loan and repayment plan you applied.

Options For Any Credit Rating

Even if you have a poor credit score or financial issues in the past, you could still be able to apply for an installment loan. Many lenders don’t regard a loan applicant’s credit score as their only deciding factor. An applicant can show other essential documents, like payslips, paychecks, or proof of billing, to serve as another determining point for his/her credit rating.

Apply Any Time of the Day

Banks and other traditional lenders follow certain standard business hours between 9:00 AM to 5:00 PM. Meaning, they can’t always be accessible 24/7. Fortunately, online lenders offer round the clock services. If an unexpected situation happens and you need some quick cash, you’ll just have to access the Internet to apply for a loan online.

If it’s a big sum of money and you need to do over-the-bank counter, you might need to wait for the next day. The good thing is you don’t have to spend more time at the bank as your application has already processed.

Flexible Repayment Terms

One of the most significant benefits of installment loans is that it offers affordable repayment terms to the borrowers. Instead of paying a large sum of money in one go, a borrower can repay the lender with lower payments with a fixed interest rate in a fixed schedule. Paying in reasonable amounts allows a borrower to start working out his/her financial management.

Takeaway

Installment loans can be a solution when you’re in need of immediate cash, not to mention its flexible repayment terms. It’s good for borrowers who are only planning to loan upfront. Just be careful not to treat installment loans like payday loans. Just like any kind of loans, an installment loan doesn’t affect your credit score as long as you always pay on time. Don’t ever think of refinancing so you can extend a repayment date. Otherwise, your debt burden will grow.

Matt Robinson, Commercial Director at Ping Finance, believes that now is the right time for SMEs to borrow, and here takes Finance Monthly through the reason why.

Low Interest Rates

In the UK, interest rates are still incredibly low. Despite a 0.25% increase back in August 2018, bringing the interest rate up to 0.75%, the UK interest rate is still way below the average that it has been in the past, and this is only a good thing for those borrowing.

At one time, during the Thatcher leadership, interest rates rose to a staggering 17% to combat inflation. Interest rates continued to rise into the late 1980s due to the pressure of increasing house prices. The election of Tony Blair in 1997 gave the control of setting the base interest rate to an independent Bank of England. Interest rates then began to steadily decline, hitting 3.75% in 2003, before increasing again up to 5.5% in 2007. Since then, interest rates have dropped drastically due to the impact of the global financial crisis, falling all the way to 0.5% in March 2009, and then a further drop to 0.25% in 2016.

After the recent rise to 0.75% in August, Mark Carney, governor of the Bank of England, said there would be ‘gradual and limited’ interest rate rises in the future. With Brexit uncertainty on the horizon, predictions for the next couple of years are speculative at best. Therefore, there has never been a better time for the likes of SMEs to borrow. Even with the slight increase, we are currently experiencing one of the lowest interest rates in the UK’s history, and with the likelihood of increases on the way in the next couple of years, borrowing right now is a smart move.

There Have Never Been More Options

Nowadays, SMEs have the luxury of being able to be as picky as ever when it comes to their financing options. The alternative finance market has exploded since banks began to withdraw following the recession; traditional loans are no longer the only option for small businesses looking to borrow.

Crowdfunding, for example, can be an effective way to raise capital by allowing people to make small investments in a project or business. Online lenders can be contacted via online applications, and funds can be transferred into accounts in as little at 24 hours.

Peer-to-peer lending creates a form of borrowing and lending between individuals without a traditional financial institution being involved and can turn out to be a cheaper alternative to borrowing from a bank or building society.

Financial technology, asset-based lending, invoice finance and challenger banks are some other alternatives to traditional high street bank lending. These alternative lenders use algorithms and data manipulation to streamline the loan approval process from weeks down to days at most. With so many viable financial services available, there has never been a better time for SMEs to take advantage of all these different options.

Competition Between Lenders

In a similar vain to there being so many different financial options, there is also heavy competition between lenders. With so many lenders vying for your business, they are doing everything possible to make their services seem more appealing to potential clients. Lower interest rates in conjunction with reduced fees or no fees are just some of what’s being offered by many lenders in a bid to secure your business.

From the perspective of an SME, you have the power to shop around and discover the best deal for you. With so many lenders competing to provide the most enticing offers, SMEs can take advantage of this and get a better deal than they would if they had to go with the first offer they were quoted.

More Business Support

It has never been easier to start a business than right now. There is a lot more guidance and knowledge out there to help people bring their ideas and ambitions to life, and most of it can be accessed for free online.

One of the biggest barriers to starting a business has always been start-up cash, and whilst that is still the case, it’s not as much of a problem as it used to be. Online platforms not only create a global marketplace for SMEs, but it’s easier than ever to contact investors and lenders and start generating cash flow to get your business off the ground.

Obtaining funding is not the only barrier to starting a business; general business support is crucial for SMEs to become successful and be able to pay back their loans. Networking, paid mentorship, free courses, government led schemes, books and the wealth of information on the internet can all be utilised by SMEs to help grow a successful business.

Post-Crash Borrowing

Since the market crash in 2008, there has been a shift in attitudes when it comes to lending. There is a greater focus on lenders to look after borrowers, stamping out shady practices and creating a better environment for those who want to borrow. As 2008 becomes a distant memory, lenders’ appetites for risk has increased, and SMEs can take advantage of this current culture of encouraged lending.

Almost half (48%) of SMEs felt that British businesses are missing out on opportunities because of a reluctance to borrow, and 45% believe that the economy is being stifled because they won’t borrow.

Yet, almost a third (27%) of those SMEs are holding back the growth of their own business, due to a ‘fear of funding’, by refusing to take external finance, according to research by Ultimate Finance.

The research, conducted by BDRC Continental on behalf of SME funding partner Ultimate Finance, challenges industry perception that small businesses are not borrowing because of an access issue.

In fact, confidence in securing finance is high; 59% of SMEs were sure they would get the money they needed, if they applied, and 57% felt they had a good understanding of the finance options available to them.

Instead, this bigger issue around the ‘fear of funding’ stems from a belief that external funding results in a loss of independence (47%), that borrowing can cause more worries (44%) and that taking external funding is too risky in the current economic climate (37%).

Ron Robson, CEO of Ultimate Finance, commented: “It’s not good news for the UK economy, if SMEs understand the benefits of borrowing, yet do not seek the funding that could have a positive effect on their operation.

“In many ways it’s not a surprise; years of economic instability which preceded Brexit has led to a general uncertainty on ‘what next’.

“The bigger challenge to tackle is that SMEs have a fear of funding and are not seeking finance when they need it. This is contrary to messages that lenders aren’t lending, which is simply not the case; borrowing figures are down due to demand. This mixed communication is contributing to confusion and takes attention away from educating SMEs about the positive impact borrowing money can have.”

The report by Ultimate Finance also looked at how borrowing can support business growth, and found that on average 27% of SMEs that do borrow, attribute external funding as a key reason for their business growth.

For larger SMEs (with 50-249 employees) this number rose to over a third (35%).

Over a fifth (21%) of businesses that have borrowed recently, also felt that without external funding, they would not be in operation today.

Robson continued: “There is clear evidence that external funding can have a hugely positive impact on an SME.

“As well as the peace of mind that comes with knowing that the basic bills will be covered, the right funding can be used for positive business investment, for example to upgrade machinery, fulfil a large order or negotiate cash-upfront discounts with suppliers, all of which help to lead to growth.

““The funding sector and the government need to come together to help change the negative perceptions around borrowing.

“Only then can we start to instil a sense of confidence in borrowing in SMEs, and support them to grow.”

(Source: Ultimate Finance)