What is the best way to finance my business?
That is a good question, but in reality, you might as well ask me, how long is a piece of string?
This is because every business is different and each scenario within that business is different.
However, I would say that it is so important to match the correct type of funding to each set of circumstances and that a few old sayings within the finance industry are worth considering.
First up is that Cash is King.
Cash flow is important; cash is to a business as oil is to an engine, and without money, the company stops. If you do not operate a cash-generating business, you may have to think hard about how to fund it and remember that profit is not the same as cash.
Second up is Sweat the assets.
In other words, consider using the assets already within the business to generate cash when looking for funding. For example, raise funds against your debtor book with an Invoice Finance facility, or take out an asset finance facility against some of your plant and equipment. Maybe the most obvious is using the business premises to raise a mortgage.
Another of my favourites is not to borrow short for long-term investments and vice versa. In other words, match the term of the facility to the purpose – if you are buying some kit that will only last three years, don’t take out a ten-year facility. Equally, a two-year loan won’t work if you purchase a factory.
So, the answer to the original question cannot be answered without looking at the whole picture. This is where a good broker comes in, taking all the bits, looking at the whole picture and packaging a suitable, workable and affordable solution.
How to Get Involved
Got a finance question? Ask Honest John!
Email me at askhonestjohn@sterlingcommercialfinance.co.uk, and I’ll do my best to provide answers in a way that makes sense. Expect straight talk, a bit of humour, and insights you won’t find in a Google search.
So, ask away with your question—I’m ready!
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