BUSINESS FINANCE · EAST MONEY GUIDE
Business finance options: matching the facility to the purpose
Business finance works best when the term, repayment profile and security match what the money is expected to achieve.
East Money · General information
Define the purpose before comparing products
Equipment, working capital, stock, a business acquisition and a fit-out have different useful lives and cash-flow effects. The facility should reflect the purpose rather than simply the amount requested.
Match the term to the benefit
Short-term needs funded over a long period can increase total cost. Long-lived equipment funded too quickly can place unnecessary pressure on monthly cash flow.
Understand the security position
Some facilities rely mainly on the financed asset, while others require property security or personal guarantees. Compare the cost with the assets and obligations being committed.
- Asset being financed and its age
- Property or other security offered
- Director or personal guarantees
- Existing lender security and priority
Show how the business will repay
Historical accounts help, but current trading, forecasts, contracts and the reason for the funding can also be relevant. Assumptions should be clear and supportable.
Keep a buffer for implementation
Delivery delays, installation costs, tax timing and slower customer receipts can affect the expected benefit. Include related costs and working capital in the plan.
QUESTIONS PEOPLE OFTEN ASK
Useful points to clarify early.
What information will a lender request?
The answer depends on the facility, amount and security, but financial statements, bank conduct and evidence of purpose are common starting points.
Can a new business obtain finance?
Options may exist, particularly when an asset or strong supporting position is available, but evidence and lender choice become more important.
Is the lowest rate the cheapest option?
Not always. Fees, term, repayment structure, security, flexibility and early-exit costs affect the total outcome.
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