Business Tips: Find the Best Routes to Finance
Every business needs finance to get the initial enterprise off the ground. You may well have entered into finance arrangements to fund the initial stages of the business. Such as, taking out loans to purchase equipment, lease premises, or take on staff.
But when was the last time you reviewed the arrangements or looked at the options for accessing other routes to funding? Are your finance facilities still offering the best interest rates and repayment terms, or are there better deals out there?
Other finance options may be available to help you fund your continuing growth. So taking a look at the current finance market is well worth thinking about.
Refinance your existing loans
It’s possible that you already have business loans in place that you’re gradually repaying over the course of the loan period. Sourcing initial capital is an important part of the startup process and a vital stepping stone in getting your business idea operational. But when was the last time you reviewed these finance arrangements? Could you be getting a better deal?
The finance market is constantly evolving. New challengers will enter the market, new specialist finance products will be introduced, and interest rates and repayment schedules will fluctuate and change. You may well have got a great deal on the business loans you took out five years ago – but refinancing these existing loans is likely to have multiple benefits.
You could:
- Consolidate your existing loans into one finance facility
- Lower the interest rate you’re currently paying on the loan
- Pay off your loan more quickly to reduce the debt in the business
- Improve your cash flow position by cutting your repayment expenses
The key point here is that your business finance shouldn’t sit still. A loan is not a static debt. You can revisit and refinance your debt to work in the business’s best interest.
Look for alternative routes to finance
Traditionally, businesses went to their bank manager when additional funds were needed. But the dynamic in the funding market has changed dramatically in recent years. Due to economic pressures and the impact of the pandemic, the big banks have scaled back their lending to small businesses. Your high street bank is no longer the first port of call when finance is needed.
On the flip side, there are a growing number of alternative lenders, smaller challenger banks, and specialist finance providers to choose from. And this has created a wide choice of different finance products to fit the needs of your growth plan.
- If you need new equipment, asset finance is available.
- Invoice finance is a good option when you have a short-term cash flow crisis.
- If larger premises are needed, there are commercial mortgages to consider or bridging loans to make the initial purchase while you source the full capital that’s required.
Check out the available government funding and grants
During the pandemic, many businesses made use of the emergency funding that the government made available. But don’t forget that government funding isn’t just during an emergency.
The state will generally offer all kinds of different enterprise schemes to encourage investment in new and growing companies. This could mean access to funding schemes, government-secured loans, or government grants. Unlike a loan, grants generally don’t need to be repaid, so using local government grants is a great way to boost your capital without negatively impacting the company’s debt position.
Explore the tax reliefs that are open to your business
Another element of government-back financial support is the use of tax reliefs. One of your major expenses as a business will be paying your income tax (IT) bill. But various tax reliefs are usually available to help you reduce your IT bill and reinvest that saved money into the business. Careful use of these reliefs can make a big difference to your finances.
For example, many countries offer some form of research and development (R&D) tax relief scheme. To encourage businesses to innovate and invest in R&D, the government will offer relief against the company’s expenditure on operational R&D costs. This will usually mean either reducing your IT liability or giving you a cash payment against your R&D expenses.
Choosing the right routes to funding and finance will be vital to your long-term success as a business – so work closely with your advisers and think carefully about your choices.