There is a lot more to financing than loans and overdrafts

Whether you are looking for finances to ensure the continuity or growth of your business, it is important that you explore all avenues early on.

“Plan, plan, plan,” suggested Paul Leith, founder of digital.accuthant, in a recent webinar on Swoop financing. “It’s too late when companies need financing tomorrow. So you have to think ahead and plan for months, if not years.”

Whether you are a business manager or a consultant, part of this planning process is identifying the types of financial needs and requirements that will affect borrower solvency. Clear loans for commercial banks with low interest rates can come into the account. But the way funding works today is likely to be better if you take the time to adapt it to your business needs.

Business Support Loans

In 2020, most businesses are likely to consider the various programs the government has undertaken to help SMEs during the coronavirus pandemic, including CBILS and BBLS. Applications for interest payments on these loans are coming soon, so borrowers may need to consider refinancing options while their business is still recovering.

What are the other financing options besides loans? Here are a few options to consider in different situations.

Asset-based financing

If you are looking to purchase equipment, consider renting rather than buying the product. This form of wealth finance is especially useful for startups or large companies looking to replace old equipment.

You must choose a finance lease or an operating lease. An operating lease is a better choice when you are looking to lease assets for the short term. You also don’t have to pay for maintenance and insurance of the assets you pay for financial leases.

Although renting can be more expensive than buying outright, both types of leases result in an asset that is shown as a rental expense, which can then be compensated for by profit when calculating corporate income tax.

Invoice financing

If you use bills to make a lot of payments, collection financing is very helpful. Some customers may take time to pay for jobs or purchases, which can slow down business cash flow and expansion plans.

However, in the case of invoice financing, the lender can advance up to 95% of the invoice value and the remaining 5% can be paid at a later date. In other words, you can unlock the value of your bill faster at the cost of the lender’s fees.

Note that there are discounts for invoicing and invoice factoring. The main difference is whether the customer knows that invoice finance is being used. In the case of a discount on an invoice, it cannot be disclosed that it is.

Trade finance

Various trade finance options are offered to importers and exporters. For companies facing cash flow problems, perhaps due to their seasonal nature, revolving loans would be a sensible option. This flexible and open loan allows the recipient to borrow money from a pile of money. All you have to do is pay monthly interest on the amount drawn from the pile before drawing more if necessary, not on the entire lot at once.

Funding R&D claims

To illustrate the dynamism of the financial world, an increase in tax credits for research and development has resulted in tax credits that allow businesses to gain early access to payments. Eligibility for this type of loan depends on the company’s real investment in the research and development type being eligible for the research and development tax credit.

In this case, the company can claim money within a week after talking to the lender, not in the month or year that HMRC can process the claim. This expedited route could be the ideal cash injection in this endeavor.

Unsecured finance

Some of the options listed are based on assets in the company, such as: B. unpaid sales invoices or tax breaks. Broader needs may be needed for broader needs – if the company’s trade history and credit rating deserve it. While the pressure to repay secured loans is more obvious, neglecting unsecured finances is a common way for businesses to get into debt.

The disruption due to Covid-19 is forcing companies and consultants to take a closer look at financial markets in 2020. Given the ongoing uncertainty surrounding Brexit, it is unlikely that these requirements will drop in the next year or two.

To ensure that the business stays afloat, apply the financial mantra that a clear understanding of the company’s goals, structure and financial condition will help you determine the right type of funding to be successful.

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