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Advantages of different forms of debt

Know your options – debt finance

 

Advantages of debt finance, when considering your future plans

  • One of the key advantages of debt finance is that the terms can be tailored to suit the precise needs of the business.
  • One of the key advantages of debt finance is that the terms can be tailored to suit the precise needs of the business.
  • Repayments are straightforward, so can be simply planned for and the cash-flow impact budgeted.
  • Generally, a loan costs less in interest than an overdraft over the same term.
  • Overdrafts and asset-based finance are often quicker to arrange than a loan.
  • Interest is only paid on the amount of money used in an overdraft and the facility is only used if required – so they provide flexibility. Similarly, with invoice finance, the equivalent of interest is only payable on the amount drawn down.Advantages Debt Finance.
  • There is tax relief on interest payments.
  • Leasing gives a business access to the equipment they need without incurring the cash disadvantage of an outright purchase.
  • Leasing is a flexible form of finance for all types of assets because the loans are secured wholly or largely on the asset being financed.
  • P2P business lending can be more quickly arranged than a bank loan.
  • Businesses apply online, allowing applications at any time of day without the need to visit a branch.
  • P2P business loans may be available from a wide range of lenders.

For more information, use our interactive journey tool, or view other debt finance considerations.

BUSINESS FINANCE GUIDE

Together on the journey

Access to the right kind of finance at every stage in your growth journey enables businesses like yours to invest, grow and create jobs. That’s why the British Business Bank and ICAEW’s Corporate Finance Faculty, and partner organisations representing finance and business, have created the business finance guide.

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