FINANCE OPTIONS

^{Understanding} Debt Financing: A Comprehensive Guide

Q: What is debt financing?

Borrowing a capital sum from a lender, with an agreement to pay it back with interest.

Q: What are common forms of debt finance?

Business loans, credit cards, and overdrafts are some of the most common.

Q: What can a Recovery Loan Scheme facility be used for?

Managing cashflow, investment, and growth purposes.

Q: What is the maximum loan amount via RLS?

Up to £2 million per business group, or up to £1 million for business groups in scope of the Northern Ireland Protocol.

Debt financing is when a person or a business borrows money and agrees to pay it back later with interest. It's like getting a loan to help cover expenses or invest, with a promise to repay over time. If you want to learn more or explore your options, just let me know!

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What are the ^benefits of Debt Financing?

Debt financing is a method where a business raises funds by borrowing money from lenders, which it must pay back with interest. This approach can be very beneficial as it allows companies to access necessary capital while retaining ownership control. Furthermore, the interest paid on the borrowed funds is often tax-deductible, providing a financial advantage that can enhance the company's profitability and cash flow.

Increases cash flow

Tax advantages

Maintains ownership

What are the different types of Debt Financing?

Bank Loans

Borrowing funds from banks, usually with fixed repayment terms and interest rates.

Bank Loans

Bank loans are a common debt financing method where businesses borrow money from banks, agreeing to repay the principal with interest over a predetermined period, often used for expansion or working capital.

Bonds

Issuing debt securities to investors to raise capital, repaid with interest.

Bonds

Bonds are long-term debt instruments issued by companies or governments, sold to investors who receive regular interest payments and are repaid the principal at maturity. Bonds help raise large sums of capital.

Trade Credit

Obtaining goods/services from suppliers with payment deferred to a later date.

Trade Credit

Trade credit allows businesses to buy goods or services from suppliers and pay for them later, typically within 30-90 days. This helps manage cash flow and finance short-term operational needs without immediate outlay.

What is Debt Financing?

Debt financing is when a business raises money by borrowing from external sources, such as banks or investors, and agrees to repay the borrowed amount with interest, without giving up ownership of the company.

Main Types of Debt Financing

The most common types are bank loans (borrowing a lump sum from banks with scheduled repayments), bonds (issuing debt securities to investors and paying periodic interest), and trade credit (getting goods or services now and paying suppliers later).

Key Features and Benefits

Debt financing provides businesses with immediate access to capital, often with flexible terms. It allows companies to maintain ownership while managing cash flow or funding growth, but requires timely repayments with interest.