Business Refinancing - How to Raise Capital in the Credit Crunch
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Business refinancing is a part of your business' growth plan that was never easy to take as read, but which you could at least see as a simple choice between low cost options- but that was when economic prospects were good and getting credit a matter of an amicable discussion with your business account manager.
Unfortunately, a very different climate is prevalent today. Business refinance has remained very hard to come by, even while your need for investment in staff or equipment, or debt restructuring, becomes more pressing. There has been an improvement in tone since the worst of the credit drought, but there is also a gathering sense of uncertainty about the economy's future.
So where can you turn to meet your business refinancing requirements, if not to your bank? Well actually there are a number of alternatives:
The asset based lending (ABL) industry has stepped up to the plate to provide a new source of business refinancing. The ABL lenders can provide you with financing, by securing the monies advanced on your assets. The future cash flows implicit in your invoices are one such asset. ABL lenders take one of two approaches to use your invoices to help your business refinancing:
Firstly they can 're-factor' your invoices and become 'factors'- this means they will deal with all you invoices themselves, and your customers will make payments to them direct. You will receive a percentage of the invoices outstanding as an initial advance. This could then become your business refinancing pool, for whatever project needs capital.
Drawbacks of refactoring include the fact your customers are now dealing with a third party, and that your profits will be hit by the fees the factor will charge. Also, the setting up of such arrangements is time consuming.
Secondly there is invoice discounting. With this you stay in charge of the sales ledger, and the ABL lender will supply funds on the outstanding invoices. You pay fees to the lender, as well as interest, and if the debt owed by your customers reduces, due to an increase in invoice settlements, you must pass on that to the lender. You do receive the business refinancing you need, but you will be paying quite a lot for the privilege. Plus this route involves the lender performing a thorough credit check before the arrangement is agreed.
Fortunately, another asset class can help your business refinancing - giving you a way forward that doesn't involve complex and expensive ABL agreements. The asset is your business property. And the approach is commercial property refinance - here, you realise the property's value in a sale, but get to remain in residence to carry on your business. The proceeds of the sale become your source of business refinancing.
SellMyCommercialProperty can help here, by stepping in as your buyer. We are experts in the area of commercial property, and have access to substantial investment funds. This enables us to set up the sell and rent back arrangement quickly, at the fair market value of your property. Your tenure is then secured by a long term lease.
Call one of the team at SellMyCommercialProperty, and find out how your property assets can be transformed into your much needed business refinancing.
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