Starting up a new business? Need a cash flow boost for your existing business? Want to purchase new vehicles or equipment?
When considering financing options for your business, there is a lot to choose from. Whether you need short term or long term finance for your business needs, finding a loan that works best for your business can save you lots in the long run.
Cash flow solutions for your business
A term loans are loans for equipment, real estate and working capital that are paid off for typically between one and twenty-five years. Interest rates for term loans can be fixed or variable, and you can choose a repayment option that meets your business’ cash flow needs. Intermediate-term loans are less than three years, and long-term loans are for three to twenty-five years.
Invoice financing is a form of short-term borrowing based on unpaid invoices. It is structured most commonly via:
- Invoice factoring, where the company sells its unpaid invoices to the lender who typically pays them 70% – 85% of the value of the invoices, upfront. Once full payment for the invoices is collected, the lender will remit the remaining amount to the business. The business will then pay interest and/or fees for this service.
- Invoice discounting, which requires the business, not the lender, to collect customer payments. The lender will pay up to 95% of the invoice amount to the business, and when customers pay the invoices, the business repays the lender with additional service fee (or interest).
Vehicle and Equipment Finance
If you need vehicle and equipment finance, there are a number of financing options available to you.
A rental agreement where the lender owns the asset and you then lease it for an agreed term and rental amount.
An agreement between you and the lender to rent equipment for an initial fixed period. You can return or purchase the equipment, or extend the lease at the end of that term.
An agreement to purchase vehicles, plant or equipment with payment terms in which the financier owns the goods during that term. Ownership is transferred to you when you make the final payment and you can purchase the equipment at any time.
A loan agreement where you borrow funds to acquire an asset. The loan is secured by way of a mortgage to the financier over the asset financed.
An arrangements offering motor vehicle fleet funding and sometimes fleet management options as well.
An arrangement in which employees lease a motor vehicle of their choice and while they remain employed, their employer agrees to pay the rentals directly from the employee’s gross salary.
Borrowing against your home
When you make the decision to tap into the equity in your home you have the choice of using a home equity loan or a home equity line of credit.
Borrowing against your house will offer you a much lower interest rate than other types of loans, so you can use your home loan to consolidate your debts and save on interest. In some cases, it may also allow you to use the interest you pay as a tax deduction, and since you’ve got an existing home loan and a history of responsible repayment, you can likely avoid the bulk of the paperwork you had to deal with the first time round.
However, considering that there can be a high level of risk involved with borrowing against your home, this option is best for those who intend to tap into the equity in their homes to increase its value (eg. to complete an extension or renovation). If you need funds for short term borrowing, a home equity loan could be putting your home at risk, and leave you with higher repayments and diminishing equity.