Australian Newsagency Blog

A blog on issues affecting Australia's newsagents, media and small business generally.

Take care before entering into a high interest loan for your newsagency business

Mark Fletcher
May 27th, 2019 · No Comments

The easier it is to arrange finance for a business the greater the likelihood that the finance offer is not a good deal.

I saw this recently when asked for help by a newsagent who had entered into a loan with a loan business. They borrowed $60.000. They had an urgent need for $35,000 but took the higher amount following a pitch from the finance company. They expected to be able to pay it off ahead of the due date.

In the contract, which they did not read because they were in a hurry, was a condition that while they could pay it off before the due date, the full interest for the original period was payable and that, in fact, interest was paid first before principal.

The interest rate was 18%. Fees to establish the loan were 5%.

In my review of the situation, there were alternatives to solving the $35,000 problem that could have been better than the high interest cost and high cash flow impact that had a knock-on effect in the business.

While I am not an accountant or a financier, my suggestions to newsagents or any small business retailer looking at urgent funding needs are:

  • Look at alternatives.
  • Take time.
  • Get a second opinion.
  • Be absolutely sure of all of the terms and conditions.
  • Borrow only what you need.
  • Never miss a payment.

There are companies promoting their services to small business retailers, offering fast and easy access to finance that is not good finance.

Buyer beware.

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Category: Newsagency management

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