Business Financing Advice
Business Financing Advice
by Wade Henderson
Most small and medium companies are depended on banks for business financing. More than half of the money that financial institutions have come from these companies.
In the globalized world of today a lot of things turn around small and medium businesses. Their main concern is often getting the proper business financing to be able to survive competitive markets. However, banks are very careful when giving business financing.
On investment, formulas for business financing vary widely:
Commercial loan: the company buys the equipment and borrows from the bank, which regulates the company that supplies the goods.
Industrial companies depend highly on the equipment they use. When commercial loans are not an option, leasing can be a good source for business financing. A leasing company will let you rent the equipment you will need for production and then bill you. You decide the terms through a contract that may or may not establish a purchase option at the end. The user is not entitled to the ownership of the equipment if the contract does not mention it.
Leasing is not only used for equipment, you can also lease vehicle and office equipment. Some providers will cover all maintenance depending on your contract.
There are selection criteria. The choice between these different forms is more open than ever. It depends of the industrial goals of the company:
Elements that are highly decisive in the funding request are the amount and destination of the investment. Banks will be reluctant to give you the totality of the funding you request. Instead they will ask you to cover from 10 to 30 percent of the investment with your own resources. A leasing company will not do this and may give you a 100% of what you requested the first time.
The prices of leasing have dropped due to the changes in the market. The prices are now more competitive because the offer has risen. Leasing companies when linked to banks give affordable prices.
Both banks and leasing companies will give you business financing on the basis of how you will use the machinery. If your production and company are stable, and have determined a rate of utilization, commercial loans are feasible. Leasing may be a more appropriate option for not well defined industrial processes. A manager is able to easily remove unwanted equipment from fixed costs when needed.
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