Focus on Business Advice
asset purchase that is funded this way can be offset against taxable profit in that year. For example, if a business financed a machine through hire purchase costing £100,000, then this amount can be offset against any taxable profit due at the appropriate rate. So, if the business made £100,000 pre-tax in that particular year, there would be no tax to pay (which at the current rate would have saved the business £19,000). A client once said to me ʻWhy would I wait to buy a piece of equipment that can make me money? Even if I donʼt have the funds available, I can use asset finance, acquire it now and make immediate profit with itʼ.
Business loans A business loan can be used for various purposes and are easy to access. The money can literally be available within a few days. Typically, thereʼs no other security required, other than a directorʼs guarantee. Repayment periods tend to be up to five years and facilities from £20,000 to £500,000 are available. Equivalent bank loans take longer to arrange and draw, and generally have more security required, which can be limiting for the business and its directors.
Invoice finance
One of the most popular ways of funding a growing business is through invoice finance. It unlocks funds that you are owed by your customers to either purchase more stock, meet weekly wage payments or keep fuel payments up to date.
Unlike bank overdrafts, an invoice finance facility will grow as your sales grow. In many cases, no additional security is required.
● It is more flexible than business loans Some of the benefits include:
or overdrafts. ● Decisions to lend against invoices can
often be made faster. ● The funding grows in line with the
companyʼs turnover. ● Typically, you get a greater level of
borrowing against the assets. ● It can help to reduce the risks of late payments or defaulted invoices.
Refinance You can raise funds for your business by unlocking capital from your existing machinery, equipment or vehicles. This is quick and easy to arrange. Your assets are valued and a percentage of the value is agreed and advanced.
Funds can be used for a variety of business purposes, such as to develop new markets, repayment of HMRC arrears and consolidate debts and lower monthly outlay.
VAT funding VAT funding facilities are unsecured, short term business loans. VAT returns represent a significant outlay for SMEs
www.printwearandpromotion.co.uk
A business loan can be used for various purposes and are easy to access
The next time you need business funding, don’t just think about the bank, there’s a huge and diverse group of alternative finance providers out there that can provide equally competitive terms and deliver results in a fast and flexible manner.
– Rob Greenhalgh, relationship manager at PMD Business Finance
and can regularly impact the cash flow of any business. Tying up cash in short-term expenditure, such as VAT, means you reduce working capital for important areas of your business. VAT bills can be spread over three to 12 months through this method of funding. This means you can control your cash flow, which also gives you more predictability over your expenditure, allowing you to smooth the peaks and troughs more effectively.
Commercial mortgages Commercials mortgages have previously been an area that the high street banks controlled. However, these days there are a plethora of providers. This means there is flexibility and competitive terms for businesses. Whether it is a property purchase or a re-mortgage situation where funds need to be released from an existing property, there are many options available. Normally, up to 75% of the value can be financed with terms ranging from three to 25 years.
So where does traditional bank funding fit into all this? Itʼs no secret that banks are becoming increasingly more difficult to deal with. While they still have a big part to play in supporting our economy, we are seeing more and more businesses looking to the external marketplace to secure the funding they require.
Recent statistics show that bank overdrafts are reducing at a significant rate and itʼs no coincidence that invoice finance facilities are growing at a similar level. Some of this has resulted from the regulations on the banks following the last recession. Itʼs not uncommon that that we see decisions on funding applications through alternative finance providers within a few hours, and deals completed within 24 hours from enquiry. This allows businesses to pounce on opportunities when they arise and similarly deal with funding problems quickly – not waiting weeks for decisions, which is common with the banks. Iʼve heard from my customers over the years that one of the common frustrations with businesses and their banks is the constant changes in relationship managers. Even more critically, face-to-face bank managers are being replaced with call centre operations. However, the alternative finance providers recognise that businesses very much still need to see their finance partners face-to-face so that they have a good understanding of their business and the challenges they face. So the next time you need business funding, donʼt just think about the bank, thereʼs a huge and diverse group of alternative finance providers out there that can provide equally competitive terms and deliver results in a fast and flexible manner.
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