So you currently run a successful business, but for some reason or another there is a financial squeeze on the operation. You need some funding but you’re not sure what’s available or if it’s suitable for you. Let’s take a look at some of the options.
Cash Flow Loans
What is a cash flow loan?
A cash flow loan is used to borrow money against the revenue a company is generating less its debt. The usual calculation to see whether a cash flow loan is feasible is Total Debt/Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA). Confused? This page will help to explain.
When would I use a cash flow loan?
Generally, cash flow loans are used for expansion. You need money now to invest in your business. This investment will drive your business forward and increase your revenue down the line. That increase in revenue is used to cover the repayments of the loan.
What is invoice discounting?
Invoice discounting is an advanced payment on one or all of your invoices. A lender will use the unpaid invoices as collateral and pay you a percentage of that amount as a loan. Services differ from lender to lender and take into account the industry you work in. However, it is possible to get up to 80% of an invoice paid as soon as it has been issued.
When would I use invoice discounting?
Typically when you have provided services or products up front and require cash to pay costs already accrued.
What is factoring?
Factoring is similar to invoice discounting in that it releases the funds tied up in unpaid invoices. When using a factoring provider they will look after the sales ledger and credit control. Your customers may become aware that you are using a factoring provider. Some clients may not like a third-party holding their information.
When would I use factoring?
When you need to focus your attention elsewhere rather than chase payments.
What is trade finance?
Simplified, trade finance is where a fund will lend you money to cover the cost of purchasing goods which you intend to sell. It is commonly used in import/export and manufacturing industries.
When would I use trade finance?
Trade finance can be used to purchase goods, bonds and stocks. It is used to plug the funding gap in a trade cycle and mitigate risk.
What is asset finance?
Asset finance is a regular charge against an asset, usually equipment that a company requires to operate or grow. Most commonly, asset finance is used in the forms of leasing or hire purchase.
When would I use asset finance?
Asset finance is usually used to avoid the cost of buying an asset outright.
Revolving Credit Facilities
What is a revolving credit facility?
Revolving credit is a flexible line of credit that can be used multiple times provided the debt doesn’t exceed the agreed amount. Common revolving credit facilities are overdrafts, credit cards and home equity line of credit.
When would I use a revolving credit facility?
Revolving credit facilities are great for flexibility. You can choose how much to borrow and when to pay it back.
Need more information or want to discuss it further?
Call 0207 495 6210
or email firstname.lastname@example.org