What commercial finance options do we suggest?
As a business consultation firm specialising in aiding companies through financial difficulties, My Business Support understands the critical role of selecting the right financial solutions. Whether you are steering your business towards solvency or considering liquidation, understanding your commercial finance options is paramount.
Types of Finance Available
There are numerous types of finance available for businesses these days but it is important to make sure you use the correct finance option that suits your business needs. Here are some of the commercial finance options:
Finance Options
Factoring and Invoice Discounting
This option is particularly beneficial for businesses experiencing cash flow issues due to unpaid invoices. By selling these invoices at a discount to a third party, your business gets immediate cash, providing much-needed liquidity. It’s ideal for businesses that have reliable customers but face delays in payments, helping bridge the gap between billing and receiving funds.
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Overdrafts
Overdraft facilities are suitable for businesses facing short-term cash flow problems. If your business experiences seasonal fluctuations or unexpected shortfalls, an overdraft can provide a temporary financial cushion. It allows you to continue operations smoothly during periods when expenses temporarily exceed income.
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Commercial Mortgages
These are long-term loans used to purchase or refinance business properties. If your business is stable enough to commit to a long-term repayment plan, a commercial mortgage can be a sensible way to invest in your own premises, potentially saving on rental costs and increasing your asset base.
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Bridging Loans
Ideal for short-term financial needs, bridging loans can help if you’re waiting for longer-term financing to come through or if you need to quickly purchase property or equipment. They are particularly useful for businesses that are in the midst of transition or are waiting for the sale of an asset.
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Asset Finance
This option allows you to borrow money against the value of existing assets, such as equipment or machinery. It’s a good choice for businesses that need to invest in their operations but don’t have the cash flow to support large purchases. Asset finance can help spread the cost of investment over time, making it more manageable.
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Stock Finance
For businesses that need to purchase inventory but don’t have the funds readily available, stock finance is an option. This type of finance uses the stock you purchase as security, making it ideal for retail businesses or wholesalers facing a shortfall in working capital but with a clear plan for sales and turnover.
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Peer to Peer Finance
This modern form of finance involves borrowing money from individual investors through online platforms, bypassing traditional banks. It can be a viable option for businesses that may not qualify for traditional loans, offering more flexible terms and potentially lower interest rates. It’s suitable for businesses with a solid plan but needing alternative funding sources.
Read MoreQuestions & Answers about Commercial Financing
When trying to source finance for your company, there are several important questions to work out. It’s always advisable to consult with legal and financial professionals during this process to ensure you pick the correct finance option which suits your scenario best.
About Finance Options
The wrong funding structure is a common cause of cash flow issues, yet it’s a problem that can often be solved with the right advice.
What can I do if my company is struggling?
If your company is facing financial difficulties, it’s vital to assess your situation thoroughly. This could mean restructuring your business model, revising your budget, or considering new sources of finance.
In extreme cases, liquidation might be the most feasible option. However, with expert guidance, many businesses can find a path back to solvency.
How do I choose the best finance option for my company?
Selecting the best finance option for your company involves analyzing several factors:
Business Goals: Short-term solutions like overdrafts or invoice discounting may suffice for immediate needs, while long-term goals might require more substantial options like commercial mortgages.
Financial Health: Assess your current financial status. Some finance options might be more accessible based on your credit history and financial stability.
Cash Flow Projections: Understanding your future cash flow can help in deciding whether short-term or long-term finance is more appropriate.
Do I need short term or long term finance?
Deciding between short-term and long-term finance depends on your immediate needs versus your long-term strategy. Short-term options can offer quick relief but might come with higher costs. Long-term finance usually involves more significant amounts and longer repayment terms but could be more cost-effective in the long run.
What are personal guarantees?
Personal guarantees might be required, especially for small and medium-sized enterprises. This means you’re personally liable if your business fails to repay the loan. It’s a serious commitment and should be considered carefully.
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Finance Options: Glossary
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A
Asset
Anything valuable that the business owns. This could be physical things like buildings or cars, or non-physical things like trademarks.
Asset Seizure
Taking control of property due to unpaid debts.
Arrears of Wages
Unpaid wages owed to employees.
B
Balance Sheet
Financial statement showing a company’s assets, liabilities, and equity.
C
Consolidate Debt
Combining multiple debts into one single debt, often with a lower interest rate.
Controlled Goods Agreement
Agreement to repay debts and avoid asset seizure.
Capital Gains Tax
Tax on the profit from selling something that has increased in value.
Cash Flow Statement
Financial statement showing cash inflows and outflows.
Collateral
Something valuable pledged as security for repayment of a loan.
D
Debt Recovery
Process of getting unpaid debts paid back.
F
Floating Charge
A form of security for a loan, using company assets.
G
Guarantor
Someone who agrees to repay a loan if the original borrower can’t.
I
Invoice Financing
Borrowing money against amounts due from customers.
Income Statement
Financial statement showing company income and expenses.
Intermediaries
People or companies acting as a middleman, often in financial transactions.
Input Tax
VAT paid by a business on purchases, which can often be reclaimed.
O
Output Tax
VAT charged by a business on its sales.
S
Shareholders Resolution
Formal decision made by shareholders, often regarding financial matters.
Self-Assessment Tax Debts
Taxes owed from self-assessment returns.
Helping businesses since 2014
About Support My Business
My Business Support offers a wide range of services, from helping clients stabilise their cash flow by preparing financial forecasts, negotiating with key creditors or raising funding, to undertaking formal insolvency appointments for businesses under more severe financial pressure.
We also provide advice and guidance on fraud to help our clients both prevent, detect and prosecute fraudulent activity.
Guest Blogs
Personal Guarantees and Invoice Finance
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Invoice Finance and Management Buy-outs
Invoice finance can be an excellent solution for supporting Management Buyouts (MBOs) or Management Buy-Ins (MBIs) due to its flexibility, accessibility, and ability to provide...
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What are Personal Guarantees & their Implications?
This blog explains Personal Guarantees (PGs) where directors personally ensure company debts. It highlights PGs as lender protection, enabling SMEs to secure finance.
Read moreWhy Choose Support My Business?
Whether it’s cashflow problems, refinance, solvent exits or fraud, we’ll help you develop a realistic strategy and manage key relationships. If things come to the worst, we’ll guide you through the challenges of a formal restructuring or insolvency process.
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