Business Finance
Line of Credit/Overdraft:
Business Line of Credit, popularly called an Overdraft. This feature gives you the flexibility to access the funds and use it as you see fit. This provides the borrower with the flexibility to use the funds when needed. It is a fact that you will only pay interest on the amount that is used. Companies use the overdraft as a quick fix to fund unexpected business expenses. It has proven to be an effective method of keeping businesses afloat when they face gaps in their cash flow.
A business overdraft can provide the extra cash your business needs to cover seasonal or working capital requirements. Essentially, an overdraft is a method of allowing an account balance to operate in debit up to a pre-approved limit. These facilities are usually secured against property.
Generally, as long as the minimum monthly interest is covered, clients can clear this debt at any point in time and have funds available up to the limit as business opportunities arise. It also provides a convenient means of dealing with fluctuations in cash flow which every business experiences.
Term Loan (secured or unsecured):
A Term Loan is a form of financing, where the repayment of the loan is amortised over a specific numbers of years, like a home loan. This form of financing is available to assist in the funding of business growth or expansion, consolidation of business debts, capital and equipment purchases as well as the purchasing or development of commercial property for owner occupation or investment; essentially any worthwhile business purpose.
A term loan facility offers the flexibility of fixed or variable interest rates, with a choice of repayment options to cater for your businesses cash flow requirements. Most Lenders/financiers allow the repayment of term loans up to 15 years. Maximum lending margins are generally assessed at 65% of the valuation of a commercial property and 80% on a residential property. There are a few lenders who can consider lending above these margins subject to terms and conditions.
Lease financing (Asset finance):
A lease financing agreement empowers a business to use a particular asset for an agreed period while making payments to the owner (the lessor), which in most cases are a bank. The business owner or company is given the option to either buy or refinance the asset once the agreed period expires. However, the condition to purchase or refinance is considered when there is a residual payment known as Balloon Payment left to be paid. Despite this, most businesses choose to either buy the asset by making a final payment or trade it for a newer version and still keep up with the lease agreement. The excellent thing about lease financing is that the business gets to choose the contract terms. Thus, allowing them to enjoy the freedom to use the assets. Since it is your asset, you already know all the costs upfront, making it almost impossible for any surprising fees or charges to come up.