A Sydney Business Coach can help you make the right decisions when it comes to finances, human resources, marketing, planning and more. Loans are a great way for companies to make investments that they could not make on their own. In addition, lending brings the following benefits to the business: fast fundraising and thus increased liquidity. With a higher leverage, companies take higher returns.
Debt financing brings many advantages for a company. However, they also have some disadvantages. Despite the drawbacks, a company that does not expect big financial slumps in the near future is likely to be leveraged. However, the amount of debt financing should be well thought out. As a business owner, you should realize how much money you need for which investment. Borrowing without a reason just to increase liquidity is discouraged, especially for young entrepreneurs and start-ups
There are different types of credit financing for different investments. The most common types of financing include investment loans and working capital loans.
Investment loans are designed for a long-term period. They are so-called fixed assets and are used e.g. invested in new companies in machinery or real estate. The advantage of an investment loan is that interest and credit conditions are set for a longer period of time. This helps companies plan better.
Interim loans are always considered when the required money from an approved project or investment loan, only in a few months is available. An interim loan can be used for a short to medium term, from 6 months to 4 years. An interim loan is a variable loan from a bank whose interest rate is always adjusted to the current level.
Working capital loans
Working capital loans are also short- to medium-term loans that serve to secure ongoing business. In particular, young entrepreneurs can cover the payments for goods, raw materials, salaries or marketing measures with the help of a working capital loan. This is a so-called current loan.
The bank is also a surety in other situations (certain customs duties or registration fees when buying buildings for example). Other types of deposits exist: reimbursement of down payments in the event of customer deposits paid, guarantees of retention of security in the building sector, financial guarantees of real estate agents, legal advice.
The bank undertakes to guarantee the importer the payment of the goods for export in exchange for documents certifying the shipment and the quality of the goods. The disadvantage is that the company pays a commission even in case of non-use. There is also pre-financing credit to finance the operating cycle.