Should we review our business funding/debt?
Debt can be good for a company. It can enable investment, additional asset purchases, recruitment, early supplier payments (maximising discounts) and accelerate business growth. It does however require to be regularly reviewed, as allowing too much debt to accrue can put undue burden on a business where cashflow fluctuates. The old adage of ‘cash is king’ is true in business! It is good practice to consider the level of asset funding and working capital that the business needs. This can change particularly where the business enters a growth stage – often a solution can be to refinance existing commitments.
Funding options
Various financial options exist including:
- overdraft
- term loans
- asset finance
- invoice discounting/factoring
- grants (repayable and non-repayable)
- leasing and higher purchase
- crowd funding
- donations
- external investors
- share options
- debt for equity
- money from personal savings
- gifts or loans from friends or family
Different solutions are required for different businesses at various stages in the business lifespan. A robust business plan, proven track record and the right advisers all support a lending decision.
What do you need to consider?
It is important that the business has a robust business plan. The business plan should include:
- an overall summary setting out the business purpose and aims. It should pull out the key areas within the following business plan sections;
- business description with its product or service and its market. It should set out what is being sold, who to and why it holds a competitive advantage
- the business financials – sales, profits, cash flows, balance sheet value & return on investment
- its funding requirements – this should be separated out between secured and unsecured borrowing
- the current organisational structure – including ownership, management and key personnel
- industry/market analysis
- key achievements – unique to the industry/business providing USPs (unique selling points) for the business and market share
Where we can help
Our extensive experience in insolvency and restructuring enables us to provide independent assessment of business’s funding requirements: what funds it has, what it needs, when they are needed and where they are most effectively applied. We can assist in the preparation or updating of your business plan, sourcing of funding, and advise on the correct level and time frame for repayment to suit operational needs. We work alongside banking and financial institutions, government agencies and other businesses, and introduce you to suitable funders for your business.
We will help you assess your situation, explore your options, provide you with advice and develop a solution for you. To arrange a free, no obligation consultation click here or call 01592 630085.