There are many SMEs financing facility options that are available for today’s businesses to tap into. So among the financing facilities for SMEs available, what is the most suitable financing for me?
A business loan is suitable for this type of working capital as:
Business loan is one of the common used for financing facilities for SMEs. However, when seeking a business loan, you need to be mindful of:
An overdraft is the way to go to cope with unexpected expenditure when the amount and timeline is unknown. This is a very common way of financing for SMEs and is ideal for those with fluctuating financial requirements.
Overdraft facilities can be either authorised or unauthorised. An authorised overdraft facility, one of the financing facilities for SMEs, is when SMEs have an agreement with the Bank upfront. Hence they will enjoy a lower rate than the unauthorised overdraft facility.
Businesses need to be mindful that:
Invoice financing will then be one of the most suitable financing facility for SMEs in this scenario as it generates new funding by turning the accounts receivable (invoices) into immediate cash. As one of the more suitable financing facilities for SMEs available, it is commonly used for businesses that have high working capital tied up with the customers (debtors).
Businesses need to be mindful that:
A business credit card is a suitable facility for this as it caters for smaller purchases that can be paid back promptly (within 30 days)
Businesses need to be mindful that:
Hire purchase (HP) or leasing is commonly used by businesses when acquiring assets and they do not want to cover the cost upfront. This can be used for vehicles, equipment or real estate. Businesses do not have a title over the asset which is being ‘leased’ from the lender. Once fully paid up, the ownership of the asset(s) will be transferred to the hirer. Hire purchase provides flexible repayment structures (monthly, quarterly or yearly) and very suitable for seasonal businesses.
Businesses need to bear in mind that:
There are also other financing facilities for SMEs, such as invoice trading and peer to peer lending. Read more here.
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