Title: 8 reasons why business borrowing is smart - Pay4
Headings: 8 reasons why business borrowing is smart
8 reasons why business borrowing is smart
09 Nov 8 reasons why business borrowing is smart
Is business borrowing a sensible option for you?
DSCR = Net Operating Income / Total Debt Service
Good debt and bad debt
Leveraging debt
When business borrowing is smart
1. Facilitating growth
2. Seizing opportunities
3. Managing seasonal fluctuations
4. Optimising your supply chain
5. Improving customer terms
6. Helping to secure future credit
7. Keeping equity in your business
8. Clearer, more disciplined financial focus
Sensible borrowing for a smart strategy
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Content: Securing access to funding from alternative providers can be as quick as just a few days, allowing businesses to jump on opportunities when they appear. The cost of business borrowing should always be assessed against the opportunity cost (cost of missing the opportunity). Often the short term borrowing cost can prove far cheaper than the lost revenue potential from a missed customer, order, or business deal. 3. Managing seasonal fluctuations
If your business experiences seasonal fluctuations in demand, and profits peak and trough throughout the year, hoarding cash generated in the good months to cover the cash shortage in leaner times can hinder the growth of your business. Your profits are effectively going unused for the majority of the year, when they could be reinvested for growth. Borrowing through a working capital solution (preferably with no non-usage charges) over the short term to cover preparation for peak periods can help you to reinvest those profits more effectively throughout the entire year. 4. Optimising your supply chain
If your business experiences seasonal variations in demand, then optimising your supply chain to align with these variations will increase efficiency, reduce waste, and improve profitability. With the right borrowing arrangement, seasonal businesses can spread out paying for peak period necessities over a longer period.