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Business finance

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If you’re searching for business finance, you have a number of routes you can go down. From loans and grants to investment finance and overdrafts; there’s a lot of help available. However, each form of finance comes with its own pros and cons so you need to work out which one would best suit your business needs.

Understanding investment finance

Commonly referred to as equity finance, investment finance requires you to sell part of your business. The investor will receive a certain level of shares in your company and as such will also benefit or lose with profits and losses.There are additional benefits to bringing in an investor other than simple financial gain. One advantage is they can bring in certain skills and new opportunities. Perhaps you have sold part of your company to an overseas investor for example – they can help to expand and improve your international brand.

You won’t need to repay a loan or pay any interest as you have sold a portion of your business or company in return for the finance. Any risks that you take with your business will also affect the investor. Therefore it’s in their own best interests to ensure your company is a success – this is perhaps the biggest advantage.Of course, the main down side to this is the fact you won’t have as much of a say in your business. You may even need to start consulting with the investor before you make any decisions. Could you handle somebody else telling you what to do with the business?

Loans: The most common choice

Loans tend to be the most popular form of business finance. Readily available, you’ll get to borrow a lump sum and pay it back over an agreed period of time.There will always be some interest involved – meaning you’ll repay the amount you actually borrowed, plus the added interest that mounts up over the period of the loan. Each lender sets its own interest rate, so it really does pay to look around for the best deal.

It’s worth noting that the loan application process has become a lot more difficult to get past in recent years. Banks have especially made it more difficult for borrowers to get the finance they need. Therefore, if you have poor credit, you may be turned down for the business finance you need – this is definitely worth keeping in mind.That said, loans tend to be the best option for paying for equipment, a new car or for an expansion to the business.

Overdrafts

If you only require additional finance occasionally then an agreed overdraft might be the answer. You can talk with your bank to arrange an overdraft limit. This allows you to go over your account balance and into your overdraft whenever you need to. Be careful with this as if you go over your agreed overdraft, there will be high fees to pay and it will affect your credit score.

Take into account all of the options available to you before you make a decision as making the wrong choice could cause your business to get into serious financial trouble.

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About Jemma Porter

About Jemma Porter

Jemma Porter is an experienced content creator who has written for a number of online publications. A self-confessed penny pincher; she's often found seeking out the best personal finance deals.

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