These funds could take the form of share capital issuance, reinvestment of business profits or debt finance.
When credit facility is the preferred option, there are numerous factors that must be considered in order to secure the best bargain. This article will highlight the key considerations when choosing the credit facility provider as a source of business financing.
Variety of products
A good provider of finance should have a variety of products from which those seeking credit can choose their preferred or most appropriate option.
This gives the potential client the freedom not only to exercise judgement but also to critically evaluate the available options before settling on one.
Flexibility of repayment plan
Most,if not all, financial services providers will have flexible repayment plans for those seeking credit.
It is paramount that one carries out a detailed analysis of the repayment plans in line with the business’ liquidity position to ensure that there will be adequate cash flows to make good on the obligation to pay as it falls due.
Competitive Interest rates
The interest paid for the loan obtained will be the main measure of the cost of finance.
As such, it is of great importance to ensure that the effective interest rate is not only competitive but also safeguarded against constant fluctuations emanating from changes in the economic conditions.
Timely processing
Time is of essence when it comes to source for finance.
The time it takes from the point of placing an application to the actual access of the funds determines whether the money will be out in good time to fulfill the intended purpose. Therefore, proper consideration must be given to timeliness with which the finance provider processes other customers’ requests as this will to a very big extent determine the possibility of the particular request being processed in good time or not.
Transparency
A good provider of finance will not just sugar-coat the product offering to appear too good to be true in the eyes of the customer, but will be careful enough to disclose the relevant information to ensure that the customer makes an informed decision.
Any attempt to conceal or in any way fail to disclose pertinent information must be treated with the seriousness it deserves as it could result in a customer being unable to service the debt and possibly a total failure of intended projects.
Debt capital as a source of business financing has numerous areas of concern that have to be carefully analyzed before making the final decision. Among other considerations is the availability of a variety of products, competitive interest rates, timely processing and transparency in disseminating important information.
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