How to Choose the Right Business Finance
Choosing the right business finance is about more than finding a lender willing to provide funding. The type of facility, repayment structure, cost and flexibility should all align with what the business is trying to achieve.
With a wide range of funding products and lenders available, understanding the requirement first can make it easier to identify a suitable structure.
Start With the Funding Requirement
The first consideration should be why the business requires finance.
Funding additional stock, purchasing equipment, managing a temporary cash flow gap or financing an acquisition are very different requirements and may be better suited to different types of finance.
Understanding the amount required, how the funds will be used and how quickly they are needed provides a clearer starting point when considering the available options.
Understand the Different Finance Options
Business finance extends well beyond traditional term loans.
Revolving credit facilities can provide flexible access to working capital, while asset finance can be used to fund vehicles, machinery and equipment. Invoice finance may allow businesses to release capital tied up in unpaid invoices, while more specialist facilities can be structured around specific transactions or requirements.
The right product will depend on the circumstances of the individual business rather than simply which facility offers the largest amount of funding.
Consider Repayments and Cash Flow
How a facility is repaid can be just as important as the amount available.
Businesses should consider whether repayments are appropriate for their existing and projected cash flow, alongside the overall term of the facility.
A structure that works well for a business with predictable monthly revenue may not necessarily suit a company with seasonal or irregular cash flow.
Look Beyond the Headline Interest Rate
Interest rates are important, but they do not provide a complete picture of a finance facility.
Arrangement fees, repayment terms, security requirements, personal guarantees and flexibility can all affect the overall suitability and cost of borrowing.
Comparing facilities on their complete structure can therefore provide a more useful assessment than comparing headline rates alone.
Consider the Wider Lending Market
Different lenders have different credit appetites, criteria and approaches to structuring finance.
Factors such as the sector in which a business operates, trading history, financial performance, available security and intended use of funds can influence which lenders are appropriate.
Considering a wider range of lenders can help businesses identify structures that may not be available through their existing bank or a single finance provider.
Choosing Business Finance With Revia
At Revia, we start by understanding the business, the funding requirement and what the finance needs to achieve.
We then consider appropriate funding structures and identify potential options from across our lender network, helping businesses navigate the market and assess the facilities available to them.
From working capital and asset purchases to expansion, refinancing and more complex requirements, our approach is focused on finding finance that fits the wider objectives of the business.
