By Craig Jiggins, Commercial Finance Director, Trusted Business Partner
Why the right funding structure matters.
For most business owners, finance is rarely the end goal.
The real objective might be to purchase new equipment, acquire another business, invest in property, recruit a new team, strengthen working capital or take advantage of an opportunity that has arrived sooner than expected.
Finance is simply the tool that helps make it possible.
Yet when businesses begin looking at funding, the conversation can quickly become focused on whether finance is available and how quickly it can be secured.
Approval matters, of course. But it should not be the only measure of whether a funding decision is right for the business.
A facility can be approved and still be poorly suited to what the business is trying to achieve.
Look beyond the headline rate
Cost will always be an important consideration, but comparing finance purely on interest rate can mean overlooking factors that may have a much greater impact over the life of the facility.
The term, deposit, monthly repayments, security requirements, fees, final payments and overall flexibility can all affect cash flow and future plans.
A competitive rate may look attractive initially, but not if the repayment structure places unnecessary pressure on the business or restricts what it may want to do next.
Equally, using cash to fund an investment can appear to be the simplest option, but that cash may also be needed to support wages, stock, tax commitments, working capital or the next growth opportunity.
Securing funding is only part of the decision. The more important consideration is whether the facility is structured in a way that supports the business today without restricting what it may want to do tomorrow.
That means considering the immediate requirement alongside cash flow, existing commitments and longer-term plans.
More choice does not always mean an easier decision
The commercial finance landscape has changed considerably.
Alongside traditional banks, businesses can now access a broad range of specialist and alternative lenders, each with different appetites, criteria and areas of expertise.
That creates greater choice and, in many cases, more opportunities for businesses to access finance.
However, it can also make the market more difficult to navigate.
A lender or facility that works well for one business, sector or transaction may not necessarily be suitable for another.
At Trusted Business Partner, we work with businesses seeking funding for everything from vehicles, machinery and equipment to commercial property, acquisitions, working capital and expansion.
The solutions may be very different, but the starting point should always be the same: understanding what the business is trying to achieve before deciding how it should be funded.
Start the conversation earlier
Some of the most challenging funding situations arise when finance is only considered once the requirement becomes urgent.
Starting the conversation earlier gives business owners more time to understand the market, compare options, prepare the right information and consider how different structures could affect the wider business.
It can also allow advisers, lenders and brokers to explore a broader range of solutions before time becomes the overriding factor.
There will rarely be one funding solution that is right for every business.
But looking beyond approval, understanding the wider market and considering how finance fits with the business’s longer-term plans can lead to better decisions.
Because accessing finance is only part of the conversation. Structuring it properly is what can make the difference.
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