Short-Term Finance: Will It Solve the Problem or Delay It?
Short-term finance can be tempting when a business is under pressure. Cash is tight, creditors are pressing, the ATO may be calling, and wages, suppliers and rent still need to be paid.
In that situation, a short-term loan can look like the quickest way to buy time. Sometimes it is exactly what is needed.
If the business has a temporary cash flow issue, a clear plan, reliable future revenue and the loan can be repaid quickly, short-term finance may help the business through a rough patch.
But in many distressed businesses, short-term finance does not fix the underlying problem. It simply adds another creditor, another repayment obligation and another layer of pressure.
Short-term loans often come with personal guarantees, general security agreements, caveats, mortgages or other security over business or personal assets. That means the decision may become a personal problem for directors and guarantors if the loan is not repaid.
Before taking on short-term finance, the key question should be: will this loan solve the problem, or just delay it?
