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AI Global Media Ltd.
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Invoice Number AIGP-0152
Order Number 1564
Invoice Date 19 April 2022
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Jook Marketing
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1AI Guest Post
  • Brand: Acquisition International (£125.00) £125.00
  • Select Publication Date: 2022-04-22
  • Total number of words: 750-1000 (£10.00) £10.00
  • Article title: Rocket Lawyer Boasts $223m Investment in an Innovating Legal Industry
  • Article text: Like with many industries, customers look to the web in search of ways to spend their money as opposed to the high street. Legal services, it seems, are following the same path. Last year, Rocket Lawyer announced a $223 million investment that was led by Vista Credit Partners, a financial partner and credit investor that is focused on data and technology. Together, they are launching Rocket Legal Cloud™, which hopes to meet the ever-increasing demand for the firm’s online legal tools.



    Rocketlawyer.com is a leader of its kind; a legal company that focuses its services on the web. Founder Charley Moore comes from a law background, but the company acts just as much like a tech startup as it does a law firm. It is this hybrid of models that has put rocket lawyers to the top of the online legal services industry.

    This market is often differentiated from the law services industry more generally because many see it as a completely different service. Furthermore, it is also arguable that they’re not even targeting the same demographic of customers either - resulting in [*link https://www.cnbc.com/2020/10/05/op-ed-more-people-are-creating-wills-amid-the-pandemic.html *]more people creating wills than ever before[*endlink*]. To understand this though, you need to understand the services that companies like Rocket Lawyer deliver.

    [*subheading*]Rocket Lawyer Review: Unique Value Proposition[*endsubheading*]

    First and foremost, the biggest difference between Rocket Lawyer and a traditional firm is the way the service is delivered and the experience of the customer. The main service, or at least its most popular, is in will creation. Of course, a will is either valid or it isn’t, and thus the resulting will should deliver the same promise regardless of whether it’s from an online company or a traditional firm.

    Whilst this is true, the process of creating the will is entirely different, and as a result, so is the price. Instead of paying several hundreds of dollars for an appointment in an attorney's office, the online company provides a form-builder in which customers can sign-up within a minute using a Rocket Lawyer login, and build a will using an online template in a matter of 15 minutes.

    Because of this automaticity, Rocket Lawyer costs are slashed to $39.99 each for their legal documents, be it a last will and testament or a pet guardian trust.

    This not only completely shifts the demographic towards customers who are:

    More tech orientated

    Looking to save on cost

    Do not have a complex estate



    These factors are further evidence that online wills are more popular among younger people. Not only are younger people more likely to prefer interacting online, but they often have less money and simpler estates at that stage of life. In fact, it goes beyond affordability and into “is a will worth the money?”.

    As we get older, the more we need a will. This was an attitude that led to many issues during a pandemic, which saw younger people die and their assets not being transferred to who they really would have wanted them to go. Having a cheaper alternative means that the amount of people using a will has increased, and therefore it’s not always in direct competition with traditional law firms. Plus, the rocket lawyer promotion attracts people who otherwise hadn’t even considered a will just yet.

    All of the above, however, is true for any online legal firm. The true unique value proposition here for Rocket Lawyer is that they not online have credibility within law (many are founded by tech guys, not law experts) but they actually offer a free 30-minute consultation with an attorney.

    Beyond this, further payments can be made for a chat with an attorney remotely, but it’s a brilliant way for Rocket Lawyer to bridge the gap between the online world and the traditional legal industry - and also mitigate some of those concerns around not having guidance from an expert.

    [*subheading*]The Future of the Legal Industry[*endsubheading*]

    The major benefit of having tech drive the service/product that you’re selling, instead of personnel, is that it can receive incremental improvements over time at a fixed cost. In other words, companies like Rocket Lawyer can further improve their form-builder, which then gives the customer an increasingly better experience for very little cost.

    In fact, once the form builders become more established and easier to build, many companies will essentially be competing on price instead of differentiation. Either way, these are two things the traditional law industry cannot be fierce on, with the costs and delivery of goods being restricted to the cost and capacity of personnel.

    [*link https://www.lawsociety.org.uk/en/topics/research/ai-artificial-intelligence-and-the-legal-profession *]AI is also having its say[*endlink*] in the law industry, with the rise of smart contracts and AI lawyers. However, like with Rocket Lawyer, this isn’t necessarily a threat to traditional law firms, though it could refine their customer base.

    If you’re wealthy and/or have a complicated and delicate legal issue, paying for an attorney is still unmatched in its service. Online wills aren’t better than the traditional product, the only benefit is their convenience, speed, and price. Many people view a will as either being valid or not, but it’s not as simple as that.

    There is a huge grey area where, whilst online wills are credible and can be fine for a simple estate, if a will was contested and/or the contents are naturally complex, it will always be preferable for an experienced lawyer to have overseen more of the will creation process. This is a bit like how accounting software cannot fully replace the value of an accountant.

    But, like with most things in life, you get what you pay for - and top-quality service comes at a disproportionately higher price. So, the real dilemma for customers is their judgment over whether paying for the best service is even necessary when the cheaper option would suffice. This is a testament to Rocket Lawyer’s mature decision in recognizing this issue and providing a free consultation with an attorney who should be able to help you make that call.

_Brand: Acquisition International (£125.00) £125.00
_Select Publication Date: 2022-04-22
_Number of images/videos: 1 (£0.00)
_Media 1: Image or video?: Image (£0.00)
_Media 1: Upload image: lawyer-3819044_960_720.jpg
_Total number of words: 750-1000 (£10.00) £10.00
_Do-Follow links: up to 3 (£10.00) £10.00
_Article title: Rocket Lawyer Boasts $223m Investment in an Innovating Legal Industry
_Article text: Like with many industries, customers look to the web in search of ways to spend their money as opposed to the high street. Legal services, it seems, are following the same path. Last year, Rocket Lawyer announced a $223 million investment that was led by Vista Credit Partners, a financial partner and credit investor that is focused on data and technology. Together, they are launching Rocket Legal Cloud™, which hopes to meet the ever-increasing demand for the firm’s online legal tools. Rocketlawyer.com is a leader of its kind; a legal company that focuses its services on the web. Founder Charley Moore comes from a law background, but the company acts just as much like a tech startup as it does a law firm. It is this hybrid of models that has put rocket lawyers to the top of the online legal services industry. This market is often differentiated from the law services industry more generally because many see it as a completely different service. Furthermore, it is also arguable that they’re not even targeting the same demographic of customers either - resulting in [*link https://www.cnbc.com/2020/10/05/op-ed-more-people-are-creating-wills-amid-the-pandemic.html *]more people creating wills than ever before[*endlink*]. To understand this though, you need to understand the services that companies like Rocket Lawyer deliver. [*subheading*]Rocket Lawyer Review: Unique Value Proposition[*endsubheading*] First and foremost, the biggest difference between Rocket Lawyer and a traditional firm is the way the service is delivered and the experience of the customer. The main service, or at least its most popular, is in will creation. Of course, a will is either valid or it isn’t, and thus the resulting will should deliver the same promise regardless of whether it’s from an online company or a traditional firm. Whilst this is true, the process of creating the will is entirely different, and as a result, so is the price. Instead of paying several hundreds of dollars for an appointment in an attorney's office, the online company provides a form-builder in which customers can sign-up within a minute using a Rocket Lawyer login, and build a will using an online template in a matter of 15 minutes. Because of this automaticity, Rocket Lawyer costs are slashed to $39.99 each for their legal documents, be it a last will and testament or a pet guardian trust. This not only completely shifts the demographic towards customers who are: More tech orientated Looking to save on cost Do not have a complex estate These factors are further evidence that online wills are more popular among younger people. Not only are younger people more likely to prefer interacting online, but they often have less money and simpler estates at that stage of life. In fact, it goes beyond affordability and into “is a will worth the money?”. As we get older, the more we need a will. This was an attitude that led to many issues during a pandemic, which saw younger people die and their assets not being transferred to who they really would have wanted them to go. Having a cheaper alternative means that the amount of people using a will has increased, and therefore it’s not always in direct competition with traditional law firms. Plus, the rocket lawyer promotion attracts people who otherwise hadn’t even considered a will just yet. All of the above, however, is true for any online legal firm. The true unique value proposition here for Rocket Lawyer is that they not online have credibility within law (many are founded by tech guys, not law experts) but they actually offer a free 30-minute consultation with an attorney. Beyond this, further payments can be made for a chat with an attorney remotely, but it’s a brilliant way for Rocket Lawyer to bridge the gap between the online world and the traditional legal industry - and also mitigate some of those concerns around not having guidance from an expert. [*subheading*]The Future of the Legal Industry[*endsubheading*] The major benefit of having tech drive the service/product that you’re selling, instead of personnel, is that it can receive incremental improvements over time at a fixed cost. In other words, companies like Rocket Lawyer can further improve their form-builder, which then gives the customer an increasingly better experience for very little cost. In fact, once the form builders become more established and easier to build, many companies will essentially be competing on price instead of differentiation. Either way, these are two things the traditional law industry cannot be fierce on, with the costs and delivery of goods being restricted to the cost and capacity of personnel. [*link https://www.lawsociety.org.uk/en/topics/research/ai-artificial-intelligence-and-the-legal-profession *]AI is also having its say[*endlink*] in the law industry, with the rise of smart contracts and AI lawyers. However, like with Rocket Lawyer, this isn’t necessarily a threat to traditional law firms, though it could refine their customer base. If you’re wealthy and/or have a complicated and delicate legal issue, paying for an attorney is still unmatched in its service. Online wills aren’t better than the traditional product, the only benefit is their convenience, speed, and price. Many people view a will as either being valid or not, but it’s not as simple as that. There is a huge grey area where, whilst online wills are credible and can be fine for a simple estate, if a will was contested and/or the contents are naturally complex, it will always be preferable for an experienced lawyer to have overseen more of the will creation process. This is a bit like how accounting software cannot fully replace the value of an accountant. But, like with most things in life, you get what you pay for - and top-quality service comes at a disproportionately higher price. So, the real dilemma for customers is their judgment over whether paying for the best service is even necessary when the cheaper option would suffice. This is a testament to Rocket Lawyer’s mature decision in recognizing this issue and providing a free consultation with an attorney who should be able to help you make that call.
product_extras: Array
submitted: 1
£145.00£145.00
1AI Guest Post
  • Brand: LUXlife (£125.00) £125.00
  • Select Publication Date: 2022-04-22
  • Total number of words: 1000+ (£35.00) £35.00
  • Article title: Large Sum Buys and Payments Abroad: How to Reduce Associated Fees
  • Article text: Buying an expensive item abroad may not sound like a logical go-to in the wake - or the midst, depending on your position - of a global pandemic. Supply chains have been chewed up, with worker and truck driver shortages, along with a microprocessor shortage that has affected a surprisingly wide range of industries.

    Nevertheless, we are more likely to purchase something from abroad than ever before. The reason for this is in part [*italic*]because[*enditalic*] of the pandemic, in which it shifted those who were tech reluctant to actually head online and shop - with this being the only option in some cases. We can see this reflected in the soaring share price of couriers like UPS over the past couple of years.

    The fact is that, when buying online, we don’t always know immediately where we’re buying from. This highlights how frictionless and borderless our economy is becoming, but there’s an issue. When paying for our goods, we are used to using our debits and credit cards. This is fine domestically, but when buying a large item from abroad, you’re likely to land yourself with a lot of FX bank fees for an international transfer.

    For example, HSBC is arguably the largest bank in England and it [*link https://www.hsbc.co.uk/international/using-your-card-abroad/ *]charges 2.99%[*endlink*] (if you can find it in the small print) in non-Sterling transaction fees for purchases, not to mention the same fee for non-Sterling withdrawals. If you wanted to avoid the card payment and instead send large amounts of money abroad via bank transfer, you’re looking at more than 3% markup (closer to 5% in US and Australia) in conjunction with wire fees - thus rendering the payment too expensive, in many instances.

    Issues also arise with some international purchases when it comes to regulation. There can be limits placed on a card, and some deals can be flagged by the issuer which then requires jumping through several hoops in an attempt to resolve. As we can see, mainstream banking payment solutions are not keeping up with the digitized, globalized economy.

    [*subheading*]Is PayPal the answer?[*endsubheading*]

    PayPal, being a tech company whose sole focus is on online transactions, is somehow just as expensive as highstreet banks using legacy systems. Beyond the usual seller fees that they charge to facilitate business transactions, there are cross-border fees alongside FX conversion fees that can quickly amount to 5%.

    A simple, common payment route where a Brit buys an American product in USD will amount to [*italic*]over[*enditalic*] 6% in PayPal fees, according to the Wise PayPal calculator. A $1,000 USD payment will amount to (when this article was created):

    [*image1*]

    For further context, $1,000 is supposed to result in £767.54, not £711.82. Clearly, PayPal is not the answer and for a large payment abroad, you’re going to get stung.

    [*subheading*]Is Cryptocurrency the answer?[*endsubheading*]

    A natural reaction to this problem of friction and inefficiency is to think of crypto because that’s what we often hear as being its key value proposition “fast, secure, cheap transactions of money”. To transfer a large sum of money abroad to another wallet overseas may be free, but there’s more going on.

    There are three key issues here, though. Firstly, most companies are still yet to accept crypto as payment, although this trend is growing. It can be frustrating to see an item that you want to buy not accepting crypto as payment, and even if many are, we still need to figure out an alternative for these situations.

    The second issue is that, whilst the transaction itself is frictionless, buying and selling crypto with fiat on an exchange is far from frictionless. The spread for crypto on Coinbase, for example, is around 0.5% - not bad at all. However, they also impose fees. For US users, there is a fixed fee of $0.99 for transactions under $10 - a ridiculous 10%+. This decreases in proportion, with a $2.99 fee for transactions between $50 and $200. On top of this, there is a withdrawal fee at many CEXs, though Coinbase doesn’t include a fee here for ACH transfers (it’s 2.49% for debit/credit cards.)

    We are clearly getting to high-street bank levels of fees here. Of course, it’s possible to cut down on some of these by using other exchanges, but it’s important to use Coinbase because it’s the second-largest crypto exchange in the world. The reason for this is that it’s so simple to use, which is necessary for some who find crypto confusing. Binance, for example, is slightly cheaper, but it’s infinitely more confusing to use, which would only introduce another issue.

    Finally, the most obvious issue is that holding crypto can mean being at risk of its ruthless volatility. As it stands, holding crypto for someone who isn’t interested in high-risk assets is a no-go. Thus, we’re in a situation where you have to exchange from fiat to crypto each time you want to purchase, making it less convenient and being hit with deposit/transaction fees more often.

    [*subheading*]Money Transfer Companies - The best way to send funds[*endsubheading*]

    You may be losing hope here, but money transfer companies may be offering the perfect solution to all of these problems. Money transfer companies, which are companies like Wise, Revolut, and Torfx which you may have heard of, are a little bit more FX-focused.

    We may think this is different from PayPal, but actually, PayPal’s key value proposition was always networking and safety - it was easy to bring up refunds and such with them, making them ideal for selling on eBay.

    However, money transfer companies are even more stripped back, although different companies have different approaches. Whilst they all use state-of-the-art infrastructure for these cross-border payments, some will focus on being the perfect [*link https://moneytransfercomparison.com/best-way-to-transfer-money-abroad/ *]method for large sums[*endlink*], along with offering free FX guidance, whilst others take a more day-to-day spending approach.

    In the example of a company suited to large sums, like Currencies Direct, this will be the ideal way to purchase a home overseas, for example. Not only do the fees + spread amount to under 1%, but there will be a dedicated dealer that can provide free guidance and support over the phone. They’re not there to hassle you, but be a free dealer, and can often recommend and support in other areas too, such as business and investment.

    Regardless of what company you pick (many use multiple companies because they’re easy to sign up to), they will likely be using a mixture of infrastructures and focus on low transaction fees - because this is the most important thing to the customer. As a result, 0.5% to 1% has become an industry norm - though Revolut has taken their competitiveness to the extreme, offering literally [*italic*]zero[*enditalic*] fees or spreads for many currency pairs, but will instead have a monthly transfer limit that can be lifted in their [*link https://www.investopedia.com/terms/f/freemium.asp *]freemium model[*endlink*].

    The beauty of money transfer companies is not just cheap transfers but the multi-currency wallet. Taking a second to open up the app (no more outdated apps created by 300-year old banks), and an extra couple of seconds to open virtual accounts in any supported currency.

    This means that not only will the “virtual” card details, that behave like a bank, can facilitate overseas payments, but you will have banking details for each and every currency account - meaning parties from that country can send you money for free. You receive the funds in [*italic*]their [*enditalic*]currency, as a seller for example, which avoids the conversion and cross-border fees.

    Not only does this give the user the choice of when to convert - or juggle their money into different currencies as and when they want to (conversions take seconds), but the conversion itself is likely to be sub 1% in fees and spread combined.

_Brand: LUXlife (£125.00) £125.00
_Select Publication Date: 2022-04-22
_Number of images/videos: 1 (£0.00)
_Media 1: Image or video?: Image (£0.00)
_Media 1: Upload image: paypal fees calculator by wise.png
_Total number of words: 1000+ (£35.00) £35.00
_Do-Follow links: up to 3 (£10.00) £10.00
_Article title: Large Sum Buys and Payments Abroad: How to Reduce Associated Fees
_Article text: Buying an expensive item abroad may not sound like a logical go-to in the wake - or the midst, depending on your position - of a global pandemic. Supply chains have been chewed up, with worker and truck driver shortages, along with a microprocessor shortage that has affected a surprisingly wide range of industries. Nevertheless, we are more likely to purchase something from abroad than ever before. The reason for this is in part [*italic*]because[*enditalic*] of the pandemic, in which it shifted those who were tech reluctant to actually head online and shop - with this being the only option in some cases. We can see this reflected in the soaring share price of couriers like UPS over the past couple of years. The fact is that, when buying online, we don’t always know immediately where we’re buying from. This highlights how frictionless and borderless our economy is becoming, but there’s an issue. When paying for our goods, we are used to using our debits and credit cards. This is fine domestically, but when buying a large item from abroad, you’re likely to land yourself with a lot of FX bank fees for an international transfer. For example, HSBC is arguably the largest bank in England and it [*link https://www.hsbc.co.uk/international/using-your-card-abroad/ *]charges 2.99%[*endlink*] (if you can find it in the small print) in non-Sterling transaction fees for purchases, not to mention the same fee for non-Sterling withdrawals. If you wanted to avoid the card payment and instead send large amounts of money abroad via bank transfer, you’re looking at more than 3% markup (closer to 5% in US and Australia) in conjunction with wire fees - thus rendering the payment too expensive, in many instances. Issues also arise with some international purchases when it comes to regulation. There can be limits placed on a card, and some deals can be flagged by the issuer which then requires jumping through several hoops in an attempt to resolve. As we can see, mainstream banking payment solutions are not keeping up with the digitized, globalized economy. [*subheading*]Is PayPal the answer?[*endsubheading*] PayPal, being a tech company whose sole focus is on online transactions, is somehow just as expensive as highstreet banks using legacy systems. Beyond the usual seller fees that they charge to facilitate business transactions, there are cross-border fees alongside FX conversion fees that can quickly amount to 5%. A simple, common payment route where a Brit buys an American product in USD will amount to [*italic*]over[*enditalic*] 6% in PayPal fees, according to the Wise PayPal calculator. A $1,000 USD payment will amount to (when this article was created): [*image1*] For further context, $1,000 is supposed to result in £767.54, not £711.82. Clearly, PayPal is not the answer and for a large payment abroad, you’re going to get stung. [*subheading*]Is Cryptocurrency the answer?[*endsubheading*] A natural reaction to this problem of friction and inefficiency is to think of crypto because that’s what we often hear as being its key value proposition “fast, secure, cheap transactions of money”. To transfer a large sum of money abroad to another wallet overseas may be free, but there’s more going on. There are three key issues here, though. Firstly, most companies are still yet to accept crypto as payment, although this trend is growing. It can be frustrating to see an item that you want to buy not accepting crypto as payment, and even if many are, we still need to figure out an alternative for these situations. The second issue is that, whilst the transaction itself is frictionless, buying and selling crypto with fiat on an exchange is far from frictionless. The spread for crypto on Coinbase, for example, is around 0.5% - not bad at all. However, they also impose fees. For US users, there is a fixed fee of $0.99 for transactions under $10 - a ridiculous 10%+. This decreases in proportion, with a $2.99 fee for transactions between $50 and $200. On top of this, there is a withdrawal fee at many CEXs, though Coinbase doesn’t include a fee here for ACH transfers (it’s 2.49% for debit/credit cards.) We are clearly getting to high-street bank levels of fees here. Of course, it’s possible to cut down on some of these by using other exchanges, but it’s important to use Coinbase because it’s the second-largest crypto exchange in the world. The reason for this is that it’s so simple to use, which is necessary for some who find crypto confusing. Binance, for example, is slightly cheaper, but it’s infinitely more confusing to use, which would only introduce another issue. Finally, the most obvious issue is that holding crypto can mean being at risk of its ruthless volatility. As it stands, holding crypto for someone who isn’t interested in high-risk assets is a no-go. Thus, we’re in a situation where you have to exchange from fiat to crypto each time you want to purchase, making it less convenient and being hit with deposit/transaction fees more often. [*subheading*]Money Transfer Companies - The best way to send funds[*endsubheading*] You may be losing hope here, but money transfer companies may be offering the perfect solution to all of these problems. Money transfer companies, which are companies like Wise, Revolut, and Torfx which you may have heard of, are a little bit more FX-focused. We may think this is different from PayPal, but actually, PayPal’s key value proposition was always networking and safety - it was easy to bring up refunds and such with them, making them ideal for selling on eBay. However, money transfer companies are even more stripped back, although different companies have different approaches. Whilst they all use state-of-the-art infrastructure for these cross-border payments, some will focus on being the perfect [*link https://moneytransfercomparison.com/best-way-to-transfer-money-abroad/ *]method for large sums[*endlink*], along with offering free FX guidance, whilst others take a more day-to-day spending approach. In the example of a company suited to large sums, like Currencies Direct, this will be the ideal way to purchase a home overseas, for example. Not only do the fees + spread amount to under 1%, but there will be a dedicated dealer that can provide free guidance and support over the phone. They’re not there to hassle you, but be a free dealer, and can often recommend and support in other areas too, such as business and investment. Regardless of what company you pick (many use multiple companies because they’re easy to sign up to), they will likely be using a mixture of infrastructures and focus on low transaction fees - because this is the most important thing to the customer. As a result, 0.5% to 1% has become an industry norm - though Revolut has taken their competitiveness to the extreme, offering literally [*italic*]zero[*enditalic*] fees or spreads for many currency pairs, but will instead have a monthly transfer limit that can be lifted in their [*link https://www.investopedia.com/terms/f/freemium.asp *]freemium model[*endlink*]. The beauty of money transfer companies is not just cheap transfers but the multi-currency wallet. Taking a second to open up the app (no more outdated apps created by 300-year old banks), and an extra couple of seconds to open virtual accounts in any supported currency. This means that not only will the “virtual” card details, that behave like a bank, can facilitate overseas payments, but you will have banking details for each and every currency account - meaning parties from that country can send you money for free. You receive the funds in [*italic*]their [*enditalic*]currency, as a seller for example, which avoids the conversion and cross-border fees. Not only does this give the user the choice of when to convert - or juggle their money into different currencies as and when they want to (conversions take seconds), but the conversion itself is likely to be sub 1% in fees and spread combined.
product_extras: Array
£170.00£170.00
1AI Guest Post
  • Brand: APAC Insider (£75.00) £75.00
  • Select Publication Date: 2022-04-22
  • Total number of words: 1000+ (£35.00) £35.00
  • Article title: Will the Australian Economy Bounce Back after 2 Years of Constant Lockdowns?
  • Article text: Besides a handful of Asian and European countries which remain to have strict enforcement of Covid restrictions, Australia has been one of the most cautious countries in the world when it comes to lockdowns. It wasn’t until late 2021, which until then had essentially seen constant lockdowns in one region or another, that lockdowns began to cease.

    Heading into 2022, with a realisation that the country had surpassed its vaccine targets and that Omicron was milder than Delta, it was now time to “live with this virus”. Cautious policy and a willingness to protect lives over the economy wasn’t the only reason for the lockdowns, of course, but also Australia’s strong financial position heading into it - with relatively low debt to GDP and strong reserves.

    For some more perspective of the extent of Australian lockdowns, the UK had phased out lockdowns since the [*nolink https://commonslibrary.parliament.uk/research-briefings/cbp-9068/#:~:text=On8March2021Englandbeganaphasedexitfromlockdown. *]8th March 2021[*endlink*]. Although some of the rules had fluctuated since then, gyms, cafe’s and businesses remained fully open since - which is coming up to a year ago now. However, since the 8th of March in Australia, we saw Sydney impose limits on visitors to the home, Victoria entering its fourth, fifth, and eventually, sixth lockdown, Sydney announced lockdown measures and restricted it to be 5km from their home.

    Not only are these lockdowns recently ending, but the borders have just been announced to fully open up to travel too for fully vaccinated travellers - with Australia having a fairly big tourism industry. Finally, the Australian economy prediction for 2022 is looking like it’s getting back to its usual self despite cases rising.

    [*subheading*]The health of Australia’s economy [*endsubheading*]

    In late 2020, when the pandemic was peaking to its worst stage - prior to sufficient knowledge, healthcare, or vaccines in its response - the Australian economy entered its first recession in 30 years. This alone tells the story of just how much Covid-19 and subsequent lockdowns impacted the economy in 2020, with otherwise buying customers locked in their homes, only to be allowed to go to the grocery store or for a walk.

    [*link https://www.bbc.co.uk/news/business-53994318 *]GDP shrank by 7% in the second quarter of 2020[*endlink*], its biggest fall since 1959. Given that it saw a fall of 0.3% in the first quarter, Australia had entered its first recession in decades - a fact that had been separating Australia’s strength from other western economies, which were deeply damaged by both the dot com bubble and the 2008 subprime mortgage crisis.

    In response to this recession, we saw some instant rebound growth - with a 3.4%, 3.2%, 1.9%, and 0.8% quarterly growth following the recession - until an eventual -1.9% contraction in the economy 5 quarters after the recession. This somewhat represented the cyclical nature of the virus, with the virus spreading more in winter, along with a cyclical nature to the lockdown restrictions.

    The upside of this cyclical nature is that it soon became apparent, and therefore businesses could have some level of foresight into this for cash flow planning - though having the foresight isn’t necessarily enough.

    However, before looking at SME’s cash flow, it’s important to point out the supply chain disruptions. Australia is already a remote country, far away from the EU - which is one of its largest trading partners. Travel bans, workforce disruptions, and a deep chip shortage led to supply chain issues in Australia, with tech companies struggling to build their products and costs on the whole rising.

    Like with most economies, this led to cost-push inflation (not demand-pull), which is the worst kind. Although this wasn’t a huge issue during the peak of Covid in 2020, in part because demand had also reduced (thus creating a fairly stagnant equilibrium), as consumer confidence rose, the supply issues became even more apparent, leading to inflation rates of nearly 4%.

    Whilst this sounds bad, being almost double the 2% target rate, it actually fared a lot better than the EU and US inflation, with the latter climbing steadily from near-zero in mid-2020 to 7.5%. In other words, the US Federal Reserve has reacted to this inflation by hiking rates up, whilst the Reserve Bank of Australia has remained stoic - even if the inflation rise was much greater than the [*link https://www.reuters.com/markets/rates-bonds/australian-inflation-surges-q4-market-bays-rate-hikes-2022-01-25/ *]RBA forecast[*endlink*].

    At the end of 2021, the unemployment rate was 4.2%, which is fairly good compared to its peers, but the low unemployment doesn’t seem to have translated into wage growth (around 2.2% in September 2021), which could be a concern given the current inflation rate. Wage growth is currently 5% in the US and 4% in the UK, in comparison. However, worker shortages due to Brexit are playing a role here. On the flip side, it can be argued that this lower wage increase is at least not exacerbating inflation.

    [*subheading*]SMEs struggle and loan guarantees resume[*endsubheading*]

    Small to medium-sized enterprises account for [*nolink https://www.oecd-ilibrary.org/sites/2bf6bc72-en/index.html?itemId=/content/component/2bf6bc72-en#:~:text=AccordingtotheBureauof,employmentintheprivatesector. *]99.8% of all Australian businesses[*endlink*] - a very high proportion. SMEs also account for employing 7.6 million workers in Australia (around 68% of the employment in the private sector), so their health also impacts everyday Australians - not just the small business owners.

    In fact, whilst Australia used to rely more on the mining boom, SMEs played a central role to the transitioning of a broader economy that now has a growing tech sector. Because of this reliance on SMEs, it meant that a core goal of the Australian government was not to neglect them during the pandemic - not least because SMEs were likely to be the shops and companies that were told to close due to restrictions, along with shifting workers to online.

    One scheme brought in by the Australian government was JobKeeper payments, which meant eligible businesses could receive $1,500 per fortnight to cover wage costs. However, when the programme ended in March 2021, it was predicted that thousands of businesses would default in the following months - and many did.

    Another programme that was due to end was the SME Recovery Loan Scheme, which helped provide financing support to small businesses. It allowed credit to be cheaper, with the government guaranteeing 80% of the loan amount. This SME Loan Guarantee Scheme was vitally important to the cash flow of small business finance, allowing them to have the capital to adapt to the Covid-19. Not just in paying wages and surviving, but proactively adopting new strategies that were more aligned with e-commerce, remote work, and the drastic changes that the pandemic had on our lives and habits.

    Whilst the scheme has been extended now to the end of June, 2022, the government guarantee has dropped to 50%.

    It certainly signals a winding down of government grants in Australia, and general financial support, despite the hangover effects that the pandemic has had. Small businesses are still struggling, having larger amounts of debt and supply chain issues remain. Many territory schemes are absent too, like no local schemes in NT or Queensland. Furthermore, we are only a few months from June 2022, when the SME Recovery Loan Scheme ends.

    As a result, many small businesses are using a guide like [*link https://smallbusinessloansaustralia.com/ *]Small Business Loans Australia[*endlink*] for extra private financing, and this will be particularly popular come June. The way Australian small businesses seek small business loans is drastically shifting away from banks and onto the web, with online lenders having flexible creditworthiness standards and rapid application approvals - often being within 24 hours, making it ideal for impromptu and last-minute cash injections.

    The northern and capital territory governments remain the most generous, though there is still a nationwide winding down of programmes.

    [*subheading*]The future of Australia’s economy[*endsubheading*]

    With restrictions and schemes winding down, we would expect to be optimistic for Australia’s economy throughout the rest of 2022. However, Covid-19 cases can affect consumer confidence (as well as possibly introducing new measures again), and we are seeing a fairly steep increase in cases each day. In late February, there were 18,000 new cases per day. From each day on, cases climbed on 5 consecutive days in a row, reaching 35,855 new daily cases on March 3rd.

    As we have seen in the UK, however, Omicron’s presence was rapid, milder than previous strains, and left the UK with high immunity - with cases now falling there. It is expected that the same will occur in Australia.

    What has more impact than cases, though, is restrictions, and the winding down of them will undoubtedly be a boost to SMEs. After 2+ years of absolutely no profits, the tourism industry is set to reignite, particularly with the high vaccination rates among countries that frequently and historically visit Australia.

    Omicron is expected to “[*nolink https://www.rba.gov.au/publications/smp/2022/feb/economic-outlook.html#:~:text=InthecentralscenarioGDP,of2023(Table5.1). *]drag on economic activity during early 2022[*endlink*]”, because high cases mean more workers isolating - and worker shortages can also cause wage inflation and CPI inflation. Total hours worked and consumer spending is also looking likely to decline in the short run due to this Omicron spike. So, it’s certainly too early for small businesses to celebrate.

    However, most analysts are seeing the light - and a lot of that comes from the anticipation of Omicron cases quickly peaking and declining due to the high vaccination rates and milder symptoms. Around halfway through the year is when the bounceback is forecast, with consumer and business confidence set to rise once again - and hopefully, sustained, presuming there are no new Covid-19 variants.

    Broad economic growth is expected to be boosted from July onwards, particularly in part due to the strong labour income growth and strong savings and wealth from Australians.

    We can’t ignore the current political situations in Europe, of course, with the recent invasion of Ukraine. The economic impacts of this are less immediate than in Europe, of course, but oil price rises have already been introduced, and business with Russia has become more difficult. Speculation on the military events are too difficult to predict, but Australia is not protected from the economic ripples that could occur.

    Inflation is set to level out at a healthy 2-3% from 2023 onwards, whilst disposable income and consumption is set to continue growing. Not only is this good news for Australia in isolation, but it’s even more impressive in relation to their peers who are suffering steep inflation that far outstrips their wage increases.

    Some other possible risks for the Australian economy comes from China’s slowing economy, which is likely to reduce demand for some exports, mostly commodities like iron ore, and construction.

    Looking back, it is easy to point out the shortcomings of the Australian government along with the struggles of SMEs, but it’s important to see it within the context of its peers. What stands out is Australia’s foresight in its previous economic success over the past few decades. Despite Australia withstanding far more lockdowns than the US, and thus longer pandemic relief programmes, we have seen less of a rise in the debt-to-GDP ratio, signalling that Australia had built up healthy reserves and savings when the times were good.

    For comparison, Australia’s debt-to-GDP climbed from 41% in 2018 to 62% in 2021. In the US, these figures were 107% to 133%.

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_Article title: Will the Australian Economy Bounce Back after 2 Years of Constant Lockdowns?
_Article text: Besides a handful of Asian and European countries which remain to have strict enforcement of Covid restrictions, Australia has been one of the most cautious countries in the world when it comes to lockdowns. It wasn’t until late 2021, which until then had essentially seen constant lockdowns in one region or another, that lockdowns began to cease. Heading into 2022, with a realisation that the country had surpassed its vaccine targets and that Omicron was milder than Delta, it was now time to “live with this virus”. Cautious policy and a willingness to protect lives over the economy wasn’t the only reason for the lockdowns, of course, but also Australia’s strong financial position heading into it - with relatively low debt to GDP and strong reserves. For some more perspective of the extent of Australian lockdowns, the UK had phased out lockdowns since the [*nolink https://commonslibrary.parliament.uk/research-briefings/cbp-9068/#:~:text=On8March2021Englandbeganaphasedexitfromlockdown. *]8th March 2021[*endlink*]. Although some of the rules had fluctuated since then, gyms, cafe’s and businesses remained fully open since - which is coming up to a year ago now. However, since the 8th of March in Australia, we saw Sydney impose limits on visitors to the home, Victoria entering its fourth, fifth, and eventually, sixth lockdown, Sydney announced lockdown measures and restricted it to be 5km from their home. Not only are these lockdowns recently ending, but the borders have just been announced to fully open up to travel too for fully vaccinated travellers - with Australia having a fairly big tourism industry. Finally, the Australian economy prediction for 2022 is looking like it’s getting back to its usual self despite cases rising. [*subheading*]The health of Australia’s economy [*endsubheading*] In late 2020, when the pandemic was peaking to its worst stage - prior to sufficient knowledge, healthcare, or vaccines in its response - the Australian economy entered its first recession in 30 years. This alone tells the story of just how much Covid-19 and subsequent lockdowns impacted the economy in 2020, with otherwise buying customers locked in their homes, only to be allowed to go to the grocery store or for a walk. [*link https://www.bbc.co.uk/news/business-53994318 *]GDP shrank by 7% in the second quarter of 2020[*endlink*], its biggest fall since 1959. Given that it saw a fall of 0.3% in the first quarter, Australia had entered its first recession in decades - a fact that had been separating Australia’s strength from other western economies, which were deeply damaged by both the dot com bubble and the 2008 subprime mortgage crisis. In response to this recession, we saw some instant rebound growth - with a 3.4%, 3.2%, 1.9%, and 0.8% quarterly growth following the recession - until an eventual -1.9% contraction in the economy 5 quarters after the recession. This somewhat represented the cyclical nature of the virus, with the virus spreading more in winter, along with a cyclical nature to the lockdown restrictions. The upside of this cyclical nature is that it soon became apparent, and therefore businesses could have some level of foresight into this for cash flow planning - though having the foresight isn’t necessarily enough. However, before looking at SME’s cash flow, it’s important to point out the supply chain disruptions. Australia is already a remote country, far away from the EU - which is one of its largest trading partners. Travel bans, workforce disruptions, and a deep chip shortage led to supply chain issues in Australia, with tech companies struggling to build their products and costs on the whole rising. Like with most economies, this led to cost-push inflation (not demand-pull), which is the worst kind. Although this wasn’t a huge issue during the peak of Covid in 2020, in part because demand had also reduced (thus creating a fairly stagnant equilibrium), as consumer confidence rose, the supply issues became even more apparent, leading to inflation rates of nearly 4%. Whilst this sounds bad, being almost double the 2% target rate, it actually fared a lot better than the EU and US inflation, with the latter climbing steadily from near-zero in mid-2020 to 7.5%. In other words, the US Federal Reserve has reacted to this inflation by hiking rates up, whilst the Reserve Bank of Australia has remained stoic - even if the inflation rise was much greater than the [*link https://www.reuters.com/markets/rates-bonds/australian-inflation-surges-q4-market-bays-rate-hikes-2022-01-25/ *]RBA forecast[*endlink*]. At the end of 2021, the unemployment rate was 4.2%, which is fairly good compared to its peers, but the low unemployment doesn’t seem to have translated into wage growth (around 2.2% in September 2021), which could be a concern given the current inflation rate. Wage growth is currently 5% in the US and 4% in the UK, in comparison. However, worker shortages due to Brexit are playing a role here. On the flip side, it can be argued that this lower wage increase is at least not exacerbating inflation. [*subheading*]SMEs struggle and loan guarantees resume[*endsubheading*] Small to medium-sized enterprises account for [*nolink https://www.oecd-ilibrary.org/sites/2bf6bc72-en/index.html?itemId=/content/component/2bf6bc72-en#:~:text=AccordingtotheBureauof,employmentintheprivatesector. *]99.8% of all Australian businesses[*endlink*] - a very high proportion. SMEs also account for employing 7.6 million workers in Australia (around 68% of the employment in the private sector), so their health also impacts everyday Australians - not just the small business owners. In fact, whilst Australia used to rely more on the mining boom, SMEs played a central role to the transitioning of a broader economy that now has a growing tech sector. Because of this reliance on SMEs, it meant that a core goal of the Australian government was not to neglect them during the pandemic - not least because SMEs were likely to be the shops and companies that were told to close due to restrictions, along with shifting workers to online. One scheme brought in by the Australian government was JobKeeper payments, which meant eligible businesses could receive $1,500 per fortnight to cover wage costs. However, when the programme ended in March 2021, it was predicted that thousands of businesses would default in the following months - and many did. Another programme that was due to end was the SME Recovery Loan Scheme, which helped provide financing support to small businesses. It allowed credit to be cheaper, with the government guaranteeing 80% of the loan amount. This SME Loan Guarantee Scheme was vitally important to the cash flow of small business finance, allowing them to have the capital to adapt to the Covid-19. Not just in paying wages and surviving, but proactively adopting new strategies that were more aligned with e-commerce, remote work, and the drastic changes that the pandemic had on our lives and habits. Whilst the scheme has been extended now to the end of June, 2022, the government guarantee has dropped to 50%. It certainly signals a winding down of government grants in Australia, and general financial support, despite the hangover effects that the pandemic has had. Small businesses are still struggling, having larger amounts of debt and supply chain issues remain. Many territory schemes are absent too, like no local schemes in NT or Queensland. Furthermore, we are only a few months from June 2022, when the SME Recovery Loan Scheme ends. As a result, many small businesses are using a guide like [*link https://smallbusinessloansaustralia.com/ *]Small Business Loans Australia[*endlink*] for extra private financing, and this will be particularly popular come June. The way Australian small businesses seek small business loans is drastically shifting away from banks and onto the web, with online lenders having flexible creditworthiness standards and rapid application approvals - often being within 24 hours, making it ideal for impromptu and last-minute cash injections. The northern and capital territory governments remain the most generous, though there is still a nationwide winding down of programmes. [*subheading*]The future of Australia’s economy[*endsubheading*] With restrictions and schemes winding down, we would expect to be optimistic for Australia’s economy throughout the rest of 2022. However, Covid-19 cases can affect consumer confidence (as well as possibly introducing new measures again), and we are seeing a fairly steep increase in cases each day. In late February, there were 18,000 new cases per day. From each day on, cases climbed on 5 consecutive days in a row, reaching 35,855 new daily cases on March 3rd. As we have seen in the UK, however, Omicron’s presence was rapid, milder than previous strains, and left the UK with high immunity - with cases now falling there. It is expected that the same will occur in Australia. What has more impact than cases, though, is restrictions, and the winding down of them will undoubtedly be a boost to SMEs. After 2+ years of absolutely no profits, the tourism industry is set to reignite, particularly with the high vaccination rates among countries that frequently and historically visit Australia. Omicron is expected to “[*nolink https://www.rba.gov.au/publications/smp/2022/feb/economic-outlook.html#:~:text=InthecentralscenarioGDP,of2023(Table5.1). *]drag on economic activity during early 2022[*endlink*]”, because high cases mean more workers isolating - and worker shortages can also cause wage inflation and CPI inflation. Total hours worked and consumer spending is also looking likely to decline in the short run due to this Omicron spike. So, it’s certainly too early for small businesses to celebrate. However, most analysts are seeing the light - and a lot of that comes from the anticipation of Omicron cases quickly peaking and declining due to the high vaccination rates and milder symptoms. Around halfway through the year is when the bounceback is forecast, with consumer and business confidence set to rise once again - and hopefully, sustained, presuming there are no new Covid-19 variants. Broad economic growth is expected to be boosted from July onwards, particularly in part due to the strong labour income growth and strong savings and wealth from Australians. We can’t ignore the current political situations in Europe, of course, with the recent invasion of Ukraine. The economic impacts of this are less immediate than in Europe, of course, but oil price rises have already been introduced, and business with Russia has become more difficult. Speculation on the military events are too difficult to predict, but Australia is not protected from the economic ripples that could occur. Inflation is set to level out at a healthy 2-3% from 2023 onwards, whilst disposable income and consumption is set to continue growing. Not only is this good news for Australia in isolation, but it’s even more impressive in relation to their peers who are suffering steep inflation that far outstrips their wage increases. Some other possible risks for the Australian economy comes from China’s slowing economy, which is likely to reduce demand for some exports, mostly commodities like iron ore, and construction. Looking back, it is easy to point out the shortcomings of the Australian government along with the struggles of SMEs, but it’s important to see it within the context of its peers. What stands out is Australia’s foresight in its previous economic success over the past few decades. Despite Australia withstanding far more lockdowns than the US, and thus longer pandemic relief programmes, we have seen less of a rise in the debt-to-GDP ratio, signalling that Australia had built up healthy reserves and savings when the times were good. For comparison, Australia’s debt-to-GDP climbed from 41% in 2018 to 62% in 2021. In the US, these figures were 107% to 133%.
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  • Brand: SME News (£100.00) £100.00
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  • Article title: Is a Business Overdraft or Line of Credit Better than a Credit Card?
  • Article text: Whilst they’re hardly a new financial product, overdrafts and line of credits are an increasingly common form of alternative borrowing. Perhaps because of the stringent requirements to take out a bank loan for small businesses, dipping into some credit is seemingly more accessible than organizing a lengthy business bank loan.

    An overdraft and line of credit are often used interchangeably, though we should be clear in making a distinction between them. Generally, they both are a means of agreeing to an extra amount of funds that are attached to a business account which can be accessed when your balance goes below zero.

    Generally, a [*link https://smallbusinessloansaustralia.com/overdrafts/ *]business overdraft’s definition[*endlink*] is that it’s more of a safety net [*italic*]beyond[*enditalic*] a line of credit. It’s structured so that payments can be made in an emergency situation where your account is below zero. Even if you have a line of credit, you could use up the credit and [*italic*]then[*enditalic*] go below zero. The bank covers you when you’re overdrawn, but you may be charged a penalty if you go past your limit, and sometimes (but not always) interest.

    A line of credit is often defined as similar, but a more formal and intentional approach to dipping into credit. These are often offered by alternative lenders, not just banks, and can be secured or unsecured with the former generally offering better interest and larger limits. Business lines of credits also have more available credit, running up to a million pounds in some cases - and are considered to be a different use case than overdrafts.

    For example, the line of credit may state you can borrow up to $100,000 and with x% of interest. Small businesses make great use of this to patch over [*link https://www.accountsandlegal.co.uk/small-business-advice/small-business-cash-flow-tips *]cash flow issues[*endlink*], as they rarely know how much credit they will need. Thus, they only borrow what’s necessary and avoid paying interest on a surplus, unused amount of credit. So, even if the interest on a line of credit is 3 times higher than a bank loan, using only $30,000 of the credit will be cheaper than the interest costs of taking out a $100,000 bank loan.

    [*subheading*]Opening a line of credit before you need it - does it cost?[*endsubheading*]

    Generally, a business overdraft will have either an annual fee or an establishment fee - whilst some have both. This could run anywhere from a few hundred pounds to a few thousand. This is seen as a [*link https://www.moneyhelper.org.uk/en/everyday-money/types-of-credit/overdrafts-explained *]form of insurance[*endlink*] - paying for the luxury of going below zero without a penalty and to make sure emergency liabilities can be paid.

    Business lines of credit, on the other hand, generally have small activation fees. Some do have monthly fees that add up to a similar amount as the business overdraft annual fee, though. This fee is generally to cover the reservation of funds - the lender is putting aside a cash reserve for the small business in case they need it. Whilst they may not literally be keeping this cash aside and unused, there is a regulation to ensure this cash is guaranteed to be accessible, hence the fee.

    [*subheading*]How does this compare to credit cards?[*endsubheading*]

    To make matters more confusing, business credit cards are somewhat similar to lines of credit. Firstly, we can distinguish them as being literal cards, so they make accessing the agreed credit very easy. You can simply walk into a store and buy some office equipment on the card and access your credit in a very direct way. Though, this becomes the [*italic*]only[*enditalic*] way to access the credit, by making a purchase. You can’t simply dip into the credit by transferring money, for example.

    Furthermore, there are often daily or monthly limits to your credit card. With lines of credit, small businesses can access the entire credit limit in one go unlike credit cards, which are a bit more cautious and limiting.

    However, the upside is that business credit cards often have slightly lower interest rates than lines of credit (though not always) and a credit card reward system. They’re also common for [*nolink https://www.moneyhelper.org.uk/en/everyday-money/credit-and-purchases/how-to-improve-your-credit-score *]building up a better credit score[*endlink*].

    [*subheading*]Comparing interest rates[*endsubheading*]

    Because of the freedom and sheer size of the line of credits, as well as being unsecured, they come with the most risk as a lender. In the UK, interest rates for a line of credit may range between 15% and 30%.

    Business overdrafts, with their collateral, and potential for penalties, have interest rates ranging from 5% to 12.5%. Business credit cards are somewhere in-between, ranging from 6% to 20%.

    [*subheading*]Which one is best?[*endsubheading*]

    Of course, the answer depends. However, we can rule out overdrafts pretty quickly in the circumstance that the small business doesn’t want (or can’t) put up collateral. Furthermore, they’re more easily terminated by the lender than lines of credit, so they’re less reliable in an emergency. They should be considered, though, if cost is the single biggest factor, as they can often offer zero interest. Furthermore, they should be considered if the borrower thinks they may exceed their line of credit, as an overdraft will have that covered.

    Credit cards, whilst sometimes more affordable than lines of credit, are a bit more restrictive. A credit card will only allow you to make purchases to then pay back, as opposed to accessing a large amount of credit in an instant. This is perfectly fine if you’re looking to buy equipment or supplies and like the idea of buy-now-pay-later. Of course, you can earn credit card rewards too, and if you’re great at repaying on time, you may be able to keep costs low.

    Lines of credit would be the better option for businesses looking to access a large pool of credit for expansion, wages, SaaS, and to meet other liabilities. You only pay interest on what you use, and there is a lot of freedom there. This may also be your best shot at a large amount of unsecured credit too, assuming your credit score is good enough.

    As far as cost goes, they all overlap. Whilst credit cards can often be cheaper than lines of credit, it isn’t always the case. Though, be sure to factor in activation and annual fees, as these will likely be cheaper with credit cards.

    Finally, they can often be used to complement each other. A line of credit may be ideal for one scenario, but if the small business is accepted for an unsecured 0% credit card, it may make sense to pay off the line of credit using it. And of course, an overdraft can be complimentary in the event that you exceed your agreed credit.

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_Article title: Is a Business Overdraft or Line of Credit Better than a Credit Card?
_Article text: Whilst they’re hardly a new financial product, overdrafts and line of credits are an increasingly common form of alternative borrowing. Perhaps because of the stringent requirements to take out a bank loan for small businesses, dipping into some credit is seemingly more accessible than organizing a lengthy business bank loan. An overdraft and line of credit are often used interchangeably, though we should be clear in making a distinction between them. Generally, they both are a means of agreeing to an extra amount of funds that are attached to a business account which can be accessed when your balance goes below zero. Generally, a [*link https://smallbusinessloansaustralia.com/overdrafts/ *]business overdraft’s definition[*endlink*] is that it’s more of a safety net [*italic*]beyond[*enditalic*] a line of credit. It’s structured so that payments can be made in an emergency situation where your account is below zero. Even if you have a line of credit, you could use up the credit and [*italic*]then[*enditalic*] go below zero. The bank covers you when you’re overdrawn, but you may be charged a penalty if you go past your limit, and sometimes (but not always) interest. A line of credit is often defined as similar, but a more formal and intentional approach to dipping into credit. These are often offered by alternative lenders, not just banks, and can be secured or unsecured with the former generally offering better interest and larger limits. Business lines of credits also have more available credit, running up to a million pounds in some cases - and are considered to be a different use case than overdrafts. For example, the line of credit may state you can borrow up to $100,000 and with x% of interest. Small businesses make great use of this to patch over [*link https://www.accountsandlegal.co.uk/small-business-advice/small-business-cash-flow-tips *]cash flow issues[*endlink*], as they rarely know how much credit they will need. Thus, they only borrow what’s necessary and avoid paying interest on a surplus, unused amount of credit. So, even if the interest on a line of credit is 3 times higher than a bank loan, using only $30,000 of the credit will be cheaper than the interest costs of taking out a $100,000 bank loan. [*subheading*]Opening a line of credit before you need it - does it cost?[*endsubheading*] Generally, a business overdraft will have either an annual fee or an establishment fee - whilst some have both. This could run anywhere from a few hundred pounds to a few thousand. This is seen as a [*link https://www.moneyhelper.org.uk/en/everyday-money/types-of-credit/overdrafts-explained *]form of insurance[*endlink*] - paying for the luxury of going below zero without a penalty and to make sure emergency liabilities can be paid. Business lines of credit, on the other hand, generally have small activation fees. Some do have monthly fees that add up to a similar amount as the business overdraft annual fee, though. This fee is generally to cover the reservation of funds - the lender is putting aside a cash reserve for the small business in case they need it. Whilst they may not literally be keeping this cash aside and unused, there is a regulation to ensure this cash is guaranteed to be accessible, hence the fee. [*subheading*]How does this compare to credit cards?[*endsubheading*] To make matters more confusing, business credit cards are somewhat similar to lines of credit. Firstly, we can distinguish them as being literal cards, so they make accessing the agreed credit very easy. You can simply walk into a store and buy some office equipment on the card and access your credit in a very direct way. Though, this becomes the [*italic*]only[*enditalic*] way to access the credit, by making a purchase. You can’t simply dip into the credit by transferring money, for example. Furthermore, there are often daily or monthly limits to your credit card. With lines of credit, small businesses can access the entire credit limit in one go unlike credit cards, which are a bit more cautious and limiting. However, the upside is that business credit cards often have slightly lower interest rates than lines of credit (though not always) and a credit card reward system. They’re also common for [*nolink https://www.moneyhelper.org.uk/en/everyday-money/credit-and-purchases/how-to-improve-your-credit-score *]building up a better credit score[*endlink*]. [*subheading*]Comparing interest rates[*endsubheading*] Because of the freedom and sheer size of the line of credits, as well as being unsecured, they come with the most risk as a lender. In the UK, interest rates for a line of credit may range between 15% and 30%. Business overdrafts, with their collateral, and potential for penalties, have interest rates ranging from 5% to 12.5%. Business credit cards are somewhere in-between, ranging from 6% to 20%. [*subheading*]Which one is best?[*endsubheading*] Of course, the answer depends. However, we can rule out overdrafts pretty quickly in the circumstance that the small business doesn’t want (or can’t) put up collateral. Furthermore, they’re more easily terminated by the lender than lines of credit, so they’re less reliable in an emergency. They should be considered, though, if cost is the single biggest factor, as they can often offer zero interest. Furthermore, they should be considered if the borrower thinks they may exceed their line of credit, as an overdraft will have that covered. Credit cards, whilst sometimes more affordable than lines of credit, are a bit more restrictive. A credit card will only allow you to make purchases to then pay back, as opposed to accessing a large amount of credit in an instant. This is perfectly fine if you’re looking to buy equipment or supplies and like the idea of buy-now-pay-later. Of course, you can earn credit card rewards too, and if you’re great at repaying on time, you may be able to keep costs low. Lines of credit would be the better option for businesses looking to access a large pool of credit for expansion, wages, SaaS, and to meet other liabilities. You only pay interest on what you use, and there is a lot of freedom there. This may also be your best shot at a large amount of unsecured credit too, assuming your credit score is good enough. As far as cost goes, they all overlap. Whilst credit cards can often be cheaper than lines of credit, it isn’t always the case. Though, be sure to factor in activation and annual fees, as these will likely be cheaper with credit cards. Finally, they can often be used to complement each other. A line of credit may be ideal for one scenario, but if the small business is accepted for an unsecured 0% credit card, it may make sense to pay off the line of credit using it. And of course, an overdraft can be complimentary in the event that you exceed your agreed credit.
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