Rich Olsen, MD of Pegasus Funding Solutions, shares his experience of the biggest mistake that business owners make when they’re looking for business funding, and what to do about it.
There’s a trend I’m seeing more and more in the SME funding market.
Business owners need cash. They feel under pressure. They want to move quickly to find a solution and fix the gaps. And they accept the first offer that lands on the table.
The biggest mistake I see is not borrowing. It’s borrowing without fully understanding the cost.
When an SME owner feels that cash flow is tightening, or spots an opportunity, it’s quite natural to want to move quickly. Whether you want to solve a problem or find funds to make the most of the opportunity you’ve spotted, moving quickly can feel like the right decision.
At this point, you are probably focused on monthly repayments: “Can I afford £X per month?”
Here’s where the danger lies. You’re about to make a decision without all the information that you need, and this can have long-term consequences.
Many lenders, particularly in the short term and alternative funding markets, charge very high levels of interest. If you are concentrating only on the monthly figure, before you know it, you’ve committed to significantly high interest repayments that create an entirely new financial problem, as well as 100% personal guarantee.
I’ve seen businesses solve one pressure point, only to create another one that is harder to fix.
Business Funding should relieve stress, not compound it.
When I work with clients at Pegasus Funding Solutions, part of my role is to slow the process down just enough to make sure that funding decisions are strategic rather than reactive.
We look at:
- The true cost of borrowing
- The short-term and long-term implications
- Alternative structures
- Different lenders across the market
- What flexibility is available
- Implications around control and future decision making.
With this approach you move from a quick fix to a longer term, sustainable solution that helps you keep your focus on your growth plans.
With access to more than 600 lenders, we are not limited to one route or one product type. This means we can explore all the options rather than default to whatever appears first.
So, my advice? Don’t accept the first offer. Understand the interest rate. Understand the total repayment. Understand the longer-term impact on your business.
It might feel like you’re delaying unnecessarily but it’s a pause you won’t regret.