According to the British Business Bank, 67% of SMEs are currently using some form of debt or finance. Business funding is as natural as taking a mortgage and has many benefits, yet some businesses consider taking finance to be a reflection of poor performance. Here we will spell out some of the reasons that using finance is actually beneficial to your business.
Businesses need money to survive, managing it correctly ensures the business runs efficiently. Finding the right funding solution is crucial to unlocking your business potential whilst at the same time making your expenses affordable and manageable.
Benefits of finance
- Get what you need now
Sometimes opportunities come without warning, equipment may need replacing, machines need upgrading or vehicles might break down. Whilst setting a proportion of profits aside for future investment each month is good practice, you just might not have the time to save before the need or opportunity is gone.
- Spread your costs
Even if you can afford to buy an item outright, the initial outlay might eat up a lot of your free cash in one go. Rather than taking the hit in one go, it might be preferable to spread the cost over time and pay the loan back whilst you generate revenue.
- Enable business growth
To serve more customers you might need more equipment, more vehicles, larger premises or to scale up your technology. Business finance allows you to expand when you need to.
- Fixed monthly repayments
Similar to a fixed vs variable mortgage, the Bank of England base rate and lender standard rates might change but your rate remains fixed. This gives you the certainty needed for long-term business planning.
- Competitive rates
As a broker and a lender we are in the rare position of being able to scour the market to bring you the best possible rates.
- Build your credit score
As your business grows, you may need access to more credit to fuel expansion. Proving you can take credit and pay it back might help you build your score and open doors in the future.
- Protect your personal wealth
Business owners often put their own money into their company especially in an emergency. Taking finance means there’s less need to mix personal finances with the business.
- Keep your cash flow for operational costs and contingencies
Using free cash, a credit card or overdraft might seem like an easy solution, but it can mean nothing is available in an emergency. Maxing out these options first could hinder your ability to get finance until they are paid off.
- Potential tax advantages
Hire Purchase agreements may allow you to claim Annual Investment Allowance or Super Deduction on your corporate tax bill, you may also be able to depreciate the asset. Lease Agreements are effectively rentals and it may be possible that the entire monthly payment can be deducted from profits before tax is calculated. Please seek professional tax advice.
- Avoid price inflation
With today’s price inflation rate, getting what you need immediately can ensure you pay today’s prices and not what might be an increased price in 6 or 12 months’ time.
Finance can be a catalyst for growth, when you’re starting a new business, you’ll need capital to launch. After a couple of years, you might need to expand and even the most established businesses will rely on finance to purchase equipment or vehicles, or fund refurbishments and new locations.
Our account managers are experts in finding the right finance solution. We know how to structure finance proposals to give you the greatest chance of success.
Portman is a leading provider of finance to UK SMEs. Our experts have arranged nearly £1billion in bespoke funding for over 10,000 companies in the last 15 years. As both a lender and a broker, we are best placed to meet your finance needs.