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Three steps to cheaper financing
Sooner or later, most businesses have to turn to external sources to finance growth, whether it is to invest in new equipment or machinery, to purchase property, to upgrade technology, or to maintain cashflow while a new product line kicks in. The cost of external financing can be considerable and keeping it down is a key element in maximising your profitability. Here are three ways in which you can do this:
1 Plan ahead
Plan your financing requirements well in advance - if possible as much as a year before the funds will be needed. This will give you time to prepare a robust application, shop around for the best source, and negotiate the most favourable terms. Indeed, the mere fact that you are planning your funding so far in advance will earn you brownie points with most sources! If you leave your funding to the last minute, not only will you limit your negotiating power, you might also give the impression that your expansion plans are not very well thought-out. Of course business owners need to be agile and respond to opportunities swiftly, but this does not alter the basic fact that quick money is almost invariably expensive money.
2 Make the lender bid for your business
Approach a number of sources with a well-prepared funding requirement and ask them to submit a proposal. These days, even banks are used to having to bid for your business. Ask banks for an overall proposal that covers every aspect of your business. But don't just look at the costs - consider also factors such as the quality of the working relationship, depth of knowledge of your industry, etc. Use your track record to leverage a better deal on charges or the amount of collateral required. Remember, the main concern for a lending source is the degree of risk involved, and a good track record will help mitigate this.
3 Ask for more than you need
Many business owners are overly modest in their funding applications fearing that if they ask for too much it will reduce their chances of success. But it is much worse to underestimate your requirements. Returning a few months later to ask for a top up not only sets alarm bells ringing about the reliability of your business plan, it is also a lot more expensive to process two applications rather than one.
- Home
- About us
- Contact us
- Site map
- Search
- News
- Our services
- International services
- Business
- Starting a business
- Employed or self employed?
- Buying a business
- Initial costs of starting in business
- Proving your credentials to investors
- The tax system for the self employed
- Business deductions
- Claiming expenses
- Choosing your accounting date
- Buying a franchise
- The construction industry
- Preparing your business plan
- Essential record keeping
- The national minimum wage and the national living wage
- Working from home
- Insuring your business
- Tax planning for businesses
- Limited companies
- The tax system for companies
- Forming a limited company
- Pros and cons of limited companies
- Buying a company 'off the shelf'
- Tax and the company car
- Company bonus or dividend?
- Tax saving strategies
- Interest and tax payments
- Companies Act 2006
- Companies House - forms you need to know about
- The law and directors' responsibilities
- Statutory records
- The company secretary
- Getting the company struck off
- Running your business
- Partnerships
- Your employees
- Selling your business
- Starting a business
- Personal
- Tax
- Spring Budget 2020
- Tax rates and allowances
- Key dates and deadlines
- Income tax
- Corporation tax
- Inheritance tax
- Capital gains tax
- Value added tax
- National insurance contributions
- Residential property letting
- Main capital allowances
- Patent box
- Business deductions
- Penalties for late returns
- Trusts and settlements
- Non domiciled individuals
- Green travel allowances
- Mileage allowances
- Vehicle benefits
- Vehicle duties
- Pension premiums
- EIS SEIS and VCT
- ISAs
- Stamp and property taxes
- Air passenger duty rates
- Landfill tax
- Charitable giving
- Annual tax on enveloped dwellings
- Diverted profits tax
- Tax credits
- State pension
- VAT
- An introduction to VAT
- Value added tax
- Bad debt relief
- Issuing VAT invoices
- Recovering VAT on staff expenses
- Fuel scale charges
- When to add VAT
- Deregistering from VAT
- Cash accounting scheme
- Flat rate scheme
- Annual accounting scheme
- VAT dos and don’ts
- VAT inspections
- How to survive the enforcement powers
- Group VAT registration
- VAT Mini One Stop Shop (MOSS)
- Reverse charge VAT for construction services
- PAYE and NI
- IR35
- Tax and business calendar
- Budgets and Statements archive
- Calculators
- Career opportunities
- Our clients