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Is debt financing the answer your business was seeking?

Is debt financing the answer your business was seeking?

Developing your brand into a concept that reaches high success can be extremely challenging in most situations, and your goals on the matter become even more implausible when you don’t have access to the necessary capital. Lack of funding is one of the main reasons some small businesses aren’t able to expand in their market or are even forced, eventually, to shut down. Considering that less than 1 percent of companies are able to access the popular form of equity known as VC, and other resources aren’t as advantageous, how are the rest of struggling organizations dealing with financial inconveniences? If you have been seeking a solution to obtain the needed capital, debt financing could be the answer to all your problems. This method involves borrowing money from a third party, a lender that will become a creditor until the promise of returning the amount will be entirely met. But why is this option appealing to companies? What can it actually do for your struggling business? Here are some of the main beneficial factors involved:

You won’t have to give up on your ownership status

Hands Giving & Receiving Money

The first and most appealing detail that draws so much popularity to the entire topic of debt financing is the lack of effects it has in terms of company ownership. When the level of capital demanded for expansion is a high one, the options you might be usually able to access are ones that involve you giving up a large part of your shares, even the majority in the case of private equity for example. Well, giving up on your ownership status might be far from what you would actually want. This is the company you have created yourself, so you would naturally prefer to maintain your position and with debt financing you will be able to do that. You will be granted the required capital while ownership will stay with you, you are not obligated to give out a stake. 

Your interest payment will have tax deductible characteristics

Repayments are a concern regardless of what type of loan you are applying for. The regular expenses you will need to cover might be something that is currently worrying you and may prevent you from accessing some financing opportunities available. Regardless of financing solutions, covering an interest is normal, and this can vary depending on lender. However, what’s great about the possibility of getting debt financing is the tax deductible characteristics of the interest rates. If you look into the subject a bit more in-depth, you will easily find out that any interest paid on an amount you have borrowed for a business purpose will be tax deductible, which means less money out of your pocket. Regardless if you choose to opt for a line of credit, a term loan or a working capital account, any option that fits within the debt financing category will come with this specific repayment advantage. You will find more details explained on the matter when going over the article provided by YSCI.

No management control changes

Full control of your company might be one of the things you are not willing to give up on, so if this is the case, you will enjoy what debt financing promises. Your current management can be maintained exactly as before, no changes need to be pursued on the matter. Perhaps you want things to go a certain way within your company, and having someone new involved might not be exactly something you would want at the moment. With debt financing, you are given access to the needed capital, but the managerial responsibilities remain solely yours. The people in charge of making important decisions within your organization will remain the same ones, and you won’t have to worry that things might not be handled in a manner that isn’t in accordance with your preferences or demands. Equity financing, depending on company, as less involvement as it might imply, will still prevent you from making important decisions on our own, but that’s not the case with debt financing. You will not be told how to run your business, you can carry out further actions without the need of obtaining approval, so there will not be any stress revolving around this particular aspect. As long as you are making your payments on time, you can run your business exactly the way you desire.

Accessibility

Another benefit that cannot be neglected is the accessibility debt financing comes with. What type of business are you running? How large is your organization? For how long have you been in business? The answers to all of these questions and any others are not exactly of great importance when it comes to obtaining this type of financing support. Whether your organization is small or large, financial support can be obtained regardless of size and other characteristics. Even small businesses are able to access capital this way, with no problems. 

Credit score advantages

A good credit score can be relevant for your company in the future. If you don’t have any proof of good credit score at the moment, applying for debt financing will give you the opportunity to build or improve things in this department. By covering repayments to your lender on time, you will be perfecting both your personal and business credit score, aspect that may come in handy when you least expect it.

Your current unstable financial situation might be the thing holding you back from developing your business further and reaching the objectives you have had since first starting out in the industry. Because regular loans or other financing solutions might be far from what your company needs at the moment, looking into debt financing is recommended. There are various details that need to be addressed on the matter, but the factors mentioned in this article clearly indicate the positivity revolving around this financing opportunity. When your business is struggling, instead of watching it dye, take action and turn things in your favor by making the right choices and debt financing could be the solution you were searching for all along.