Structuring business finance is a complex task that requires careful consideration. Based on our experience, the structure, & management of borrowings often have a greater impact than the choice of credit provider. It is crucial to focus on understanding the business’s needs before jumping into credit solutions or providers.
Key Factors in Advice
Business borrowers typically require bespoke finance. Customer’s specific needs can include:
1. Loan Term
What is the initial loan term and repayment basis? Is it the short-term principal and interest or interest-only? How does it align with the new cash flow position?
2. Product Suitability
Does the loan allow for future borrowing capacity to meet changing business needs as it grows?
3. Pricing
What are the costs involved? What is the interest rate? It’s important to exercise caution, as pricing can be more complex than it appears.
4. Additional Services
Are there specific additional services needed from a banking relationship, such as treasury, foreign exchange, or trade facilities?
5. Covenants
The quality of the people involved is critical for many businesses, both at the front and back end. However, for some borrowers who prefer minimal interaction, this factor may be less essential.
6. Relationship
Covenants play a significant role, but some lenders may have qualitative demands or excessive paperwork requirements that can be frustrating.
CONCLUSION
In conclusion, mastering the basis of advice for structuring business finance is paramount to ensuring long-term success and sustainability. As we’ve explored the key factors in this article, it becomes evident that tailoring finance solutions to specific business needs is essential. Loan terms, product suitability, pricing transparency, and the availability of additional services all play critical roles in determining the right financial path. Furthermore, understanding covenants and the dynamics of the banking relationship can significantly impact a borrower’s experience. With this knowledge in hand, businesses can forge a solid financial foundation, fuel growth, and seize opportunities for a prosperous future. Take control of your financial future and unlock new opportunities for your business.
Book a meeting now and let our expert advisors guide you towards tailored financial solutions that will pave the way for your success.
Disclaimer:
The information provided in this blog is for educational purposes only and should not be considered financial advice. Always consult with a professional financial advisor or lender for specific lending decisions.
