When to use short term funding for business
Short-dated business funding suits a bill with a date on it, a payment arriving late, an opportunity closing this week, or a lender that has already said no. It does not suit a structural trading loss. HomeSec funds all four of the first kind against property, and does not fix the term — there is no minimum and no maximum.
The honest answer starts with a correction: we are not recommending you borrow briefly. We are recommending you borrow for exactly as long as the problem lasts, which is not the same thing and is why we do not fix the term.
Four situations where this kind of funding is the right tool
A bill with a date on it. A wind-up notice, a Director Penalty Notice, a settlement with penalty interest running, a supplier who has moved you to stop-credit. The cost of borrowing is being weighed against the cost of the thing happening, and usually it is not close.
A payment that is late arriving. A progress claim certified but not paid, retention held past practical completion, a receivable ninety days out. The money exists, it is just not here yet.
An opportunity that closes this week. Discounted stock, plant at auction, a partner’s share, a competitor’s assets. Speed is the entire value.
A lender who has said no. Declined on financials you cannot change, on a credit file you cannot rewrite, or on a postcode nobody looked past. There is nothing wrong with the deal — it did not fit somebody’s policy.
Where it is the wrong tool
A structural trading loss. This funds a mismatch between when money leaves and when it arrives. It does not fund a business losing money on every job, and borrowing against the family home in that situation makes the eventual outcome worse. We decline files on that basis regularly.
Also wrong: an ongoing working-capital need, which is a facility rather than a loan; and anything without an identifiable exit.
Why “short term” is the wrong frame
Fix a loan at three months and one of two things happens. Either you are finished in six weeks and pay for three months anyway — most fixed-term lenders charge a minimum period whether you use it or not. Or your exit slips a fortnight and a performing loan becomes a default, with extension fees and penalty rates attached.
Neither outcome has anything to do with whether you were good for the money.
We do not fix the term. No minimum, no maximum, no penalty for repaying early, no fee to extend. We can do that because we fund our own loans with our own money and have no fund mandate requiring capital back on a date.
The test to apply before borrowing
Write down the exit and the date. If you can name a signed contract of sale, a formal letter of offer from an incoming lender, or a certified progress claim, you have an exit. If the sentence begins “things should”, you do not — and no lender doing their job should write it.
Reviewed by Jason Brockmuller, Joint Chief Executive