Almost every small business needs to borrow finance at one time or another, and the options can appear daunting.
Furthermore, it’s no longer relatively easy to get a loan from a bank: since the financial crash of 2008, they have significantly tightened their lending criteria and in many cases become extremely risk averse. So when you need business finance on hand to deal with cash flow issues or to power growth, alternative lenders like Cashsolv can make all the difference.
But what exactly are your best business finance options?
A good starting point can be a business line of credit, which acts rather like a flexible mortgage or an overdraft: you agree a limit and an interest rate and can draw down and repay at will.
This gives you additional cash on hand whenever you need it – and of course means that you only pay interest when you actually borrow, thus minimising your outgoings.
However, when you combine a line of credit with another business finance solution, you can really open up your options.
A line of credit and a term loan
A structured bank loan, with predictable repayments over a predetermined period, can be an ideal way to finance a major asset or a marketing campaign that will repay dividends in the medium term.
However, as already stated, getting a bank loan is far from simple – even if you’re accepted, chances are the application process will be pretty complex.
But with an alternative lender, you may well find that there are far fewer hoops you have to jump through to gain your business finance. Of course, your loan and your line of credit don’t have to come from the same institution, provided you are open and honest with both lenders.
A line of credit and a business credit card
Credit cards are an excellent way to pay for day-to-day business expenses ¬– and defer the cost for a few weeks.
However, you should avoid becoming too reliant on cards as a means of borrowing, as the interest rates are notoriously high.
That said, a combination of a business credit and a line of credit is an excellent idea – you can use the former to defer purchases and the latter to cover the shortfall if you can’t pay the card off in full.
A line of credit and invoice factoring or discounting
Invoice factoring or discounting can tame a troublesome cash flow for good, by allowing you to borrow against the value of your invoices as soon as you issue them.
(At Cashsolv, we’ll allow you to borrow 85% of their value, whilst other lenders will set their own terms.) Repayment is made as soon as your customers pay you: with factoring, the finance company takes over your debtor ledger and assigns experienced credit control professionals to secure early payment and reduce your interest, whilst with invoice discounting you retain control of your own debtors.
Add a business line of credit into the mix and you have a surefire solution to protect you against cash flow crises, with worries about late payment becoming a thing of the past.
To learn more about your business finance options, and about what Cashsolv can do for you, please visit our business finance page.
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