I took out a short-term business loan secured by a charge on my home, but I can’t afford the repayments. What can I do?
Oh dear, you’ve got yourself in a bit of a pickle, right? Now, I could give you a right telling off, but that won’t help. Honestly, you’re not the first to find yourself in this mess, and you won’t be the last.
So, what can you do? Well, it depends if this is just a short-term hiccup or a long-term bother. Whatever it is, you must be upfront with your lender and explain your situation. Don’t bury your head in the sand; it’ll only make things worse.
They might work out something with you to delay payments if it’s just a temporary blip. After all, they don’t want the hassle of repossessing your home. If you can’t agree, take a good hard look at your finances and see if you can repay the loan over a longer stretch.
If you can, consider refinancing. If you can’t, it’s probably time to talk with an insolvency expert.
Assuming you can stretch the payments out, look for lenders who offer longer-term loans. Many of them don’t like taking on someone else’s debt.
But don’t fret; some lenders consider it. You need to know where to look. That’s where a good broker comes in, like me, Honest John, always here to lend a hand.
Now, that’s what you can do, but let’s chat about what you should do to avoid getting into this pickle in the first place. Here are some tips for raising finances for your business:
- Differentiate between a want and a need. You might want a short-term loan, but you need cash, and a loan might not be the best solution.
- Make sure you understand your exit. How are you going to repay the loan?
- Produce good financial data to ensure the business is going in the right direction, and most importantly, create sensitised cash-flow forecasts to prove you can afford loan repayments.
- Shop around to get the best deal in terms of cost and the security you need to provide. An experienced broker can be very useful here.
Unforeseen things can throw us off course, but if that happens, deal with it. As I always say, don’t bury your head in the sand.
How to Get Involved
Got a finance question? Ask Honest John!
Email me at askhonestjohn@sterlingcommercialfinance.co.uk, and I’ll do my best to provide answers in a way that makes sense. Expect straight talk, a bit of humour, and insights you won’t find in a Google search.
So, ask away with your question—I’m ready!
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