Running a business comes with its fair share of challenges, and sometimes, you might need extra funding to keep things moving. While securing a loan can be a great way to boost your cash flow, stacking multiple loans on top of each other is risky and can do more harm than good. Before you consider getting funding from multiple providers, here’s why loan stacking could put your business in a tough spot.
Loan stacking is when a borrower takes out multiple loans from different lenders in a short period, often without informing each lender about the others.
The Dangers of Loan Stacking
- Negative Impact on Your Credit Score: Every time you apply for a new loan, lenders perform credit checks that can reduce your business’s credit score. Additionally, managing multiple loans increases the risk of missed or late payments, further damaging your credit score and making it difficult to access funding in the future.
- Over-Indebting Your Business: By taking on multiple loans, your debt obligations can quickly spiral out of control. Businesses that overextend themselves financially may struggle to meet repayment terms, which can lead to defaults, legal issues or even bankruptcy.
- Higher Rates: When lenders see that your business already has multiple outstanding loans, they may perceive you as high-risk. This can result in significantly higher interest rates, making funding even more expensive and difficult to sustain.
- Strained Cash Flow: Managing multiple loans means making multiple repayments, often with different schedules and interest rates. This can place significant strain on your cash flow, limiting your ability to reinvest in your business and cover operational costs. Poor cash flow management is one of the main causes of business failure.
Why SASFA Members Don’t Stack Loans
Funders who are SASFA members understand the risks of loan stacking and take a responsible approach to business financing. If a business has an existing loan, a reputable funder may offer to settle the existing loan, consolidating the debt into a single more manageable loan with a new interest rate. However, in many cases a business seeking additional funding beyond what they already have may be declined due to exceeding their borrowing capacity.
The Benefits of Choosing a SASFA Member as Your Funding Partner
Choosing a SASFA member as your funding partner means working with a lender who prioritises your business’s financial health while adhering to ethical lending practices. SASFA members follow a strict Code of Conduct that ensures fairness, transparency and responsible lending. This means businesses receive clear terms and conditions, tailored funding solutions and financial support that aligns with your repayment capacity rather than pushing unnecessary debt.
Why Choose a Lender who is a SASFA Member:
- Responsible Lending Practices: SASFA members ensure businesses do not take on excessive debt that could jeopardise their operations.
- Tailored Financial Solutions: Lenders assess each business’s financial situation carefully to provide funding that aligns with repayment abilities.
- Ethical and Transparent Terms: Members offer clear funding terms without hidden fees or exploitative conditions.
- Long-Term Business Stability: With structured payments linked to turnover, businesses can maintain cash flow while still accessing growth capital.
By choosing a SASFA member, businesses can trust they are engaging with a reputable funder who prioritises ethical practices and long-term financial sustainability.
The right funding partner can not only help you navigate cash flow challenges but also support your business’s growth and success. Find a SASFA member now.
