A business loan can sometimes cover a temporary gap between money going out and money coming in. But if your company runs short every month, another repayment could make matters worse. Start by working out the size of the gap, what caused it and exactly how you would repay the finance. Any offer will still depend on the lender's checks and terms.
Is this a timing gap or a deeper shortfall?
A timing gap has a clear amount and end date, with money genuinely expected to come in. A deeper shortfall keeps returning because normal income does not cover normal outgoings. The difference matters: adding another repayment can make a recurring shortage worse.
- Which essential payments are due, and on what dates?
- Which incoming payments can you evidence, and how certain are the dates?
- Has the same gap occurred in previous months?
- What existing finance payments already leave the account?
- Could you still afford a new repayment after a weaker month?
This is a practical cash-flow check, not a solvency test. If your company may be unable to pay debts when they fall due, use the official business debt and continuity guidance and obtain appropriate professional advice promptly.
Immediate actions before taking on more debt
- Update your short-term cash forecast using payment dates, not invoice dates.
- Send accurate invoices promptly and chase overdue amounts.
- Speak to customers and suppliers early about realistic payment dates.
- Pause or reschedule non-essential spending where you reasonably can.
- Check existing facilities and relevant public support before adding another product.
If a commercial customer has paid late
You may be entitled to statutory interest and fixed recovery costs on a qualifying late commercial payment. Whether this applies, and whether pursuing it makes commercial sense, will depend on the contract and the circumstances. Check the current GOV.UK late-payment guidance. Eligible small businesses can also review the free help offered by the Small Business Commissioner.
When finance may—or may not—fit
| Potential signs of a temporary need | Warning signs requiring a different response |
|---|---|
| The maximum deficit and its duration can be quantified. | The deficit returns during normal trading every month. |
| A credible receipt or operating recovery is documented. | Expected payments are uncertain or repeatedly delayed. |
| You can still afford the repayment in a weaker month. | New borrowing would mainly service existing borrowing or overdue liabilities. |
| You know exactly what the finance is for and how it will be cleared. | You cannot identify how the facility will be repaid. |
Routes to investigate
Depending on how your company trades, you could investigate a short-term loan, an overdraft or revolving facility, invoice finance, card-sales-linked finance or refinancing suitable business assets. Each works differently and has its own costs, eligibility checks, security and repayment pattern.
See the working-capital finance comparison for the route-level detail. That list describes categories and does not mean that every route is available through Mills Commercial Finance or suitable for you.
A simple timing example
What to prepare for a finance conversation
You may be asked for current bank statements, accounts or management figures, a short cash-flow forecast, overdue-invoice information and details of existing facilities. Be ready to explain how much you need, what it is for and how you expect to repay it. Requirements vary, and supplying information does not mean finance will be approved.
Frequently asked questions
Can a business borrow to cover a cash-flow gap?
Potentially. First check that the gap is genuinely temporary and that you could afford the repayments, including during a weaker month. Any finance will depend on the lender's checks and terms.
How do I know whether the gap is temporary?
Work out its maximum size and how long it lasts. Check whether it has happened before, evidence the money due in and test what happens if that money arrives late or is lower than expected.
What if the business cannot pay its debts?
Do not treat more borrowing as the automatic answer. Review the current GOV.UK business debt and continuity guidance and obtain appropriate professional advice promptly.