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Seeking emergency funding needs care

May 17, 2022

Disruption to the supply of goods is putting some businesses under stress.

Company directors have some responsibility to their suppliers. They should not buy goods on credit if there’s a real risk they will never be able to pay for them. 

Directors can be personally responsible for reckless trading. Think of Mainzeal and former prime minister Jenny Shipley.

If you are in a business, which could be severely interrupted by lack of supplies, start thinking about how you could get emergency funds. 

Examples could be:

make an arrangement with your bank early.

if paying your suppliers could be a problem, talk to them now about some extended credit.

don’t overlook a useful short-term source of funds – your credit cards. The interest rate is very high but if you know your cash shortfall is short-term – say a month – credit cards have the advantage of not incurring a fixed fee for the use of the credit, and they don’t take your time to arrange them. Never use your credit cards for longer term finance.

Borrowing from family, particularly elderly parents who can ill afford to lend, is risky. Be very sure you can repay.

Using Inland Revenue money is likely to be the most expensive loan you can get.  

The department double dips because it not only charges you interest at a reasonably high rate, but it also then punishes you with penalties. 

These both compound. 

If you are getting to the stage you can’t pay your taxes, maybe it’s time to wind up your business.

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