Throughout the normal business trading year, there will be times when finances get suddenly stretched beyond the norm. There are various means of accessing the extra funding needed to keep things on an even keel. An overdraft for example, is generaly available from the normal bsiness bank account expressly to allow for short term funding. They work differently to standard bank loans in that there are no fixed repayment fees, the firm pays only the interest on the amount they have become overdrawn. There will be an arranging fee payable to the lender and the interet rate is going to be much higher than for a loan. This can sometimes cause a stumbling block if the short term problem turns out to be more serious. Any late or missed payments will attract a default charge plus a dent in the companies credit rating.
Another form of business funding is equity finance which can involve angel investors, who are generally well established entrepreneurs or people with extensive experience in the world of business. They use their own finances in exchange for an equity stake in the borrower’s business. As well as offering funding, angel investors provide invaluable business guidance and advice on a whole raft of topics and will very often open up a whole world of new contacts and networking opportuities which make the arrangement very attractive.