Sometimes you find yourself needing cash instantly to help you with bills, unexpected business costs and just life in general. Many of those who are employed rely on their monthly or weekly wages to cover these costs and put a bit by for a rainy day.
But what do you do when you are self-employed and need instant money to cover a cash-flow problem, prominent bills or even expansion of the business? There are a number of choices, each with pros and cons.
Most self-employed people will take out a loan at some point in their life. Whether it is for starting up an enterprise (a business loan) or covering a cost for equipment, refurbishments, expansion etc. You have two options if you are thinking of taking a loan out for raising quick cash: you can either go for a long term loan and spread the cost of payments (better for larger sums of money), or a short-term loan with slightly higher interest (for smaller amounts of cash).
Logbook Loans are a convenient way to take an affordable, short-term loan without the need to do a credit check. This is why many self-employed people will turn to Logbook Loans to raise quick cash for their cash-flow issues. Your car or vehicle is used as security, which means you still get to use your vehicle but you release the value of it for a short time – until you pay the amount borrowed back to the lender. The average loan amount borrowed is £920 according to Auto Advance, and the average term is around 11 months. Self- employed people may borrow money to buy new materials for a job, and have the flexibility to pay the money back in a couple of months. With a logbook loan at Auto Advance, they will only pay for the months they have the loan out. The only risk is that if the payments are defaulted upon, the borrower is at risk of having their vehicle repossessed.
Bank business loans
Banks will lend business starters money after completing a credit check and after the person borrowing the money shows why they need it – this can mean jumping through a few hoops. Often a business plan is made for the purpose of showing your investor that your business is going to work and why the money is needed. It could be that you want a refurbishment or new machinery or it could be to start off a new business idea. What ever it is you need to raise quick cash for, banks are generally the place to get larger sums of money.
This is pretty similar to a logbook loan, but pawnbroker shops do not use your car to secure the loan. You can pawn your jewellery, technology, musical instrument or any other personal item by either selling it to the shop for a price without buying it back or, pawning the item for a loan, within a certain contractual period of time. You may redeem the item for the amount of the loan plus some agreed-upon amount of interest. If your payments slip, the item pawned will be sold.
Credit cards are useful for self-employed people because, once again, it is instant cash, which you pay back – just watch out for the interest rates. Some people will only pay back the minimum amount each month, but this is not advisable because it will take you a long time to clear the balance. Unlike the logbook loan and pawnbroker shops, a credit check is required to get a credit card.
If you have a business bank account, you can request a business overdraft facility depending on whether the bank offers it. This is convenient to cover unexpected costs and bills within your business. Often there is a cost for borrowing money and is advisable that this should be considered only for short-term loans.
Auto Advance is an established Logbook Loans company with representatives across the UK, and a member of the Consumer Credit Trade Association.