4 Advantages of Taking Out Business Financing

When you’re starting a business or trying to operate it more effectively, there are different approaches to doing this. One of them is to consider financing to provide the cushion to proceed towards your business goals. Here are four advantages of taking out business financing. 

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1. Predictable Repayment Schedule

When running the business, the revenue moves up and down. That may be because of seasonal changes to trade or simply the normal ebb and flow of the company. Given that revenues are variable, it’s useful to at least keep expenses and financing arrangements at a predictable level. This makes planning so much easier, especially when funds become tighter in quieter months. 

A business loan like those offered through Advanced Point Capital can provide different funding levels depending on the respective business. Loans may allow one year or multiple years to repay them with a fixed payment that makes outgoings more predictable. Sometimes, even companies with a history of some bad credit are considered if they’re now trading well or on an expansion track. 

2. Flexible Short-term Finance

If a standardized loan over several years doesn’t suit your business, then there are other options with financing. 

Another approach is a line of credit. This is an efficient way to borrow from a lender if the amount required month-to-month varies considerably. A credit line is opened where the borrower withdraws monies up to the limit agreed upon. They can then repay it over a preferred duration, per the lending agreement. 

For example, with a line of credit of $50,000, it’s possible to draw $25,000 from it for 2 months, then repay $10,000 of the balance, but later draw an extra $5,000 and then complete a full repayment in half a year. The flexibility is what’s sought after here, and for businesses that need chunky amounts, but only occasionally, it can work out less expensive too.  

3. Expansion When the Opportunity Arises

It might not always be best to pursue rapid expansion across all fronts. Some opportunities are better than others, making it better to wait for the fat pitch and not squander capital on poor growth options. 

The beauty of using finance to help with expansion is that the business is not held back from chasing growth when it’s sensible to do so. An unexpectedly higher demand for a physical product will require extra capital to purchase inventory which might not be available leading to lost sales. However, when tapping business funding at that time, the opportunity doesn’t have to become a lost one. 

4. Get Through Seasonal Trading Periods

For companies with a track history that’s profitable but suffers seasonable dips in trade, sometimes an unusually deep seasonal decline can catch the business off-guard. At this point, there are difficult decisions to be made. 

A seasonable reduction in staffing levels is probably underway anyway, but it may be necessary to make more aggressive cuts. Another approach is to borrow to sustain the business through that period and use profits to come in the better trading seasons to repay the lending. Doing so avoids the need to lose valuable staff during a seasonal period. 

Using financing as a business tool is an effective approach. As long as it’s managed carefully and well, it’s a no-brainer.