Am I getting the most out of my business financing?

Monday 15th August 2022

Am I getting the most out of my business financing?

Monday 15th August 2022
Written by Steve Roxby

Whatever stage you are with your business, from start up to seasoned, financing can be the staple of a sustainable model. It can be vital to ensuring your business gets through the ebbs and flows of your market, and world events that can affect everything from viability of our goods or services, to staff retention and cashflow. So, what is it? And how does it benefit business? 

What is business finance?

Business finance comes in many forms. The most common relate to: 

  • Shareholder equity – where funds are injected into the business via increased ownership or where the business may be unable to procure debt.

  • Business loans – usually longer term with principal and interest repayments.

  • Short term finance – including leasing or chattel mortgages used to acquire specific assets eg: motor vehicle, machinery.

  • Working Capital – consisting of overdraft facilities for short term trading needs.

When considering the best finance facility there are many issues to consider: 

  • Normally the term of the loan is matched with the life of the asset.

  • Structuring of the finance to ensure minimum interest costs and tax efficiency

  • Ability to repay the finance, including analysis of the profitability and/or return on investment of the asset being acquired.

Why might Maxim advise affirmatively for business finance?

There are a few benefits for gaining business finance. Firstly, it can fund you through growth stages where simply relying on profits could not. It can assist with gaining assets that contribute to greater production of goods or services, staff retention and onboarding, land or office space gain or upgrade, and whatever assets are required to keep your business sustainable and on an upward trajectory. Secondly, it can help you face hurdles without significant negative disruption to your ability to continue business as usual.

Maxim’s role in advising you through business finance would be to: 

  • Conduct a thorough analysis of the viability of your company to have the capacity for enough profitability to fulfil and sustain shareholder expectations, or pay back debt. 

  • Assess the viability of your potential investments.

  • Examine and compare potential lenders for the best fit.

  • Assess if the intended fund distribution is going toward areas and assets that will improve your business in tangible, profitable ways. 

  • Benefits of restructuring existing finance with better repayment outflows.

Why Maxim would advise against business finance

Our advice is exclusively case by case, we never opt into a one-size-fits all model. However, there are overarching risk assessment procedures we will work with you on to determine if you should take on business finance. We might flag potential risks if:

  • You are currently in a lot of debt, and struggling to pay those debts.

  • Your intended use of the funds is not toward a profitable asset.

  • Your ability to scale profitability does not align with shareholder expectations.

  • You’re looking to business finance to get out of financial difficulty, rather than to scale up your business. 

Business funding can be particularly valuable in these times. There is a lot of negativity about increasing inflation rates. However, with interest rates still at historically low levels, these times may also provide future opportunities to explore. 

If you are considering business finance, Maxim can walk you through the pros and cons as they specifically relate to you and your business, and offer advice on its feasibility to grow your business.