Is your business on the brink of collapse because of poor cash flow?
If it’s any consolation, you’re not alone. A disproportionately high number of small businesses fail because they run into cash flow issues.
While that’s not a good spot to be in, it’s not all doom and gloom. There are options you turn to for the much-needed financial assistance. A bounce back loan is one of those options.
However, is this type of business loan the best option for your business right now? Read on to find out.
What Is a Bounce Back Loan?
Generally, a bounce back loan is any type of loan designed to help businesses quickly access cash at a low interest rate.
The term was, however, made popular by the UK government, which ran a Bounce Back Loan Scheme to help small businesses weather the adverse economic effects of the COVID-19 pandemic.
In the U.S., there are a number of government-sponsored COVID-19 relief loans that are available to businesses.
How to Determine If Your Business Needs a Bounce Back/Recovery Loan
Just because your business has access to loans doesn’t necessarily mean you should apply. Business loans can be a big liability.
Many small business owners struggle with debt management and it’s not uncommon to hear stories of businesses filing for bankruptcy because they’re unable to repay their debts.
That being said, if you’re in any of the following situations, a bounce back loan could come in handy:
You Have No Cash Reserves (Working Capital)
While a person can scrape by without any cash for several days, a business cannot. Every day, there are crucial everyday business expenses that have to be made. Adequate working capital enables you to meet these expenses and keep the company running even when your revenues are shaky.
So, if your working capital is declining faster than you can refill it from company revenues, it’s better to go in for a bounce back loan and replenish it. Don’t wait, hoping that your revenues will pick up quickly and help you get the much-needed working capital.
You’re Facing Business Interruption
Business interruption occurs when a certain event prevents your business from operating normally. As a result, it loses income.
The COVID-19 pandemic is a good example of an interruptive event, but there are others, such as a natural disaster or cyber-attack. If your business is facing prolonged closure because of such an event and the resulting loss of income will affect your finances, you can get a bounce back loan to shield the business – especially if it still has to meet some of its operating costs.
The Business Is in Debt
It’s not a good idea to go in for a loan when you’re already struggling with debt. However, there are scenarios where it makes sense.
For example, if you have tax debt, the solution is to pay it off as soon as possible; otherwise, harsh consequences like excessive fines and even jail time await. While a service like https://companydoctor.co.uk/hmrc-debt/ will help you explore your options, getting a bounce back loan to settle the debt is a good move.
Pounce on a Bounce Back Loan
A bounce back loan can mean the difference between business success and failure. But you have to know when to pounce on it. Find a good bounce back loan provider, apply, and put the funds to good use.
Explore our blog for more business finance tips and advice.