When running a business you can often ignore the signs of insolvency, taking out short term loans, propping up the...
It’s essential that business owners keep a close eye on their cashflow at all times and make detailed plans to ensure that there are always funds available when they’re needed. However, there are times when business needs exceed cash to hand and Insolvency Practitioners Lines Henry are able to help with this by arranging bridging finance to temporarily close the gap in your cashflow. One particular type of bridging loan involves something known as an ‘interest roll-up’, but what are roll-up loans and are they suitable for your needs?
What is an interest roll-up loan?
Most people would be familiar with the standard model used for loans to people and businesses, where money is lent over a fixed period for an agreed length of time (generally 2-5 years) and the repayments are calculated to be equal, regular (usually monthly) and incorporate portion of the principal and a portion of the interest agreed on the money borrowed.
A loan arranged with interest roll-up works slightly differently and it’s the way that interest is applied and repaid which is of particular note. When money is borrowed under a roll-up arrangement, there are usually no regular payments. Instead, the interest charged is regularly added to the amount borrowed and the whole becomes repayable at the end of the loan.
When would interest roll-up loans be suitable?
Because of the way interest is calculated, roll-up loans are only really suitable for short term borrowing, businesses looking to spread the cost of a purchase over a longer term should consider another type of finance arrangement, however as an option for bridging finance, they can provide a quick solution for an immediate, but short-term cashflow problem.
- Roll-up loans can be arranged quickly
- They’re usually secured on property
- There are no monthly repayments
A roll-up interest loan might be used by businesses which need to move quickly on an opportunity which requires more funds than they have immediately available and without committing to the regular repayments other types of financing might require.
Businesses which need to make asset purchases that they expect to sell again quickly, or to purchase equipment for a job which is expected to be lucrative enough to cover the purchase cost once completed, might well make use of an interest roll-up loan.
How Can I Arrange a Roll-up Loan?
At Lines Henry, we can help with business funding to allow your business to adapt to the financial challenges it faces in these tough times. Contact us for a free consultation and we can provide advice on all kinds of Bridging loans, including those involving interest roll-up borrowing as well as helping you make the arrangements for the short term funding you need.
Speak to us, we can help.