Businesses sourcing finance for growth, must take care to understand the liabilities and risks that accompany financial agreements.
Approach potential financiers with a detailed plan to support your loan application.
Compare the different funding options:
- Bank overdrafts
- Term loans
- Commercial bills
- Asset finance
- Plant & equipment leasing
- Invoice discounting or factoring
- Inventory finance
- Export or trade finance.
Seek guidance from your Accountant as you will need to prepare financial statements a business plan, a budget and a cashflow forecast to support funding applications.
When investing in new assets for the business, match the term of the debt to their useful lifecycle. For example, if buying a new machine that is expected to last 10 years, it is best to take out a loan that will be repaid over the 10 years, rather than use an overdraft or take out a short-term loan. Consider leasing as an alternative to outright purchase.
An accountant will help you calculate the optimal “lease versus buy” scenario and advise on the best finance structure.