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: This allows them to stock key items in advance, increase efficiency through larger orders, and respond faster to industry trends. Business borrowing also allows you to pay your suppliers early, without creating or exacerbating gaps in your working capital. Your business can therefore approach suppliers from a position of strength, securing preferential terms and discounts that will further enhance profitability. 5. Improving customer terms
With the pressure eased on your working capital, not only will your business be able to secure preferential terms with your suppliers, but will also be able to offer optimum terms to your customers, improving your competitiveness without leaving your cash flow stretched. 6. Helping to secure future credit
If your business is experiencing good growth, and profitability is healthy, then you should still consider business borrowing as a strategic element of a longer term plan. Even if on the surface, your business does not appear to require it. Companies such as Google and Amazon are ‘debt-free’, thanks to their strong cashflow and profits, yet this is still considered inefficient – they finance the company with retained earnings. As companies such as these mature and their growth inevitably slows down, debt will likely become an increasingly important source of funding.