Navigating the complex world of business finance can be daunting for many clients. As an accountant, you play a crucial role in guiding them through this process and ensuring they make informed decisions.
In 5 Tips To Prevent Your Client From Making a Mistake When Borrowing for Business Finance, Kirsty McGregor went through the five essential tips to help your clients avoid common pitfalls when borrowing for business finance.
1. Be Credit Score Aware and Ready
The first step in preparing for a business loan is understanding the importance of credit scores. A good credit score can open doors to better financing options with more favourable terms. Encourage your clients to monitor their credit regularly and take steps to improve it if necessary. Being proactive about credit health puts them in a stronger position when the time comes to seek financing.
2. Use a Marketplace Platform for Access and Expertise
Gone are the days of traditional loan applications. Today, platforms like Capitalise offer a modern approach, providing access to a wide range of lenders and financial products. By using such platforms, your clients can benefit from the expertise of specialists who understand the marketplace. This can lead to more competitive offers and a better fit for their specific business needs.
3. Keep an Open Mind for Various Products - Maximise the Lending and Security
It's easy to have preconceived notions about certain financial products, but it's important to keep an open mind. Whether it's invoice financing or another type of loan, each product has its own set of advantages. Help your clients think critically about how they can maximise the lending available for the security they're providing. The right product could be one they haven't previously considered.
4. Consider All Terms - All Costs, Security and Repayments
When evaluating financing options, it's crucial to look beyond the headline interest rate. Clients should consider all the terms of the loan, including fees, collateral requirements, and repayment schedules. Each of these factors can significantly impact the overall cost of borrowing and the viability of the loan for their business.
5. Don't Look at the Headline Figures - Assess the Risk and Return
High-interest rates can be alarming, but they don't always tell the whole story. Encourage your clients to assess the potential return on investment that the borrowed funds could generate. Sometimes, a higher rate may be justifiable if the loan will enable significant growth or profitability. It's a matter of balancing risk and return to make a sound financial decision.
By following these five tips, your clients can approach business borrowing with confidence and clarity. As their trusted advisor, your guidance is invaluable in helping them navigate the complexities of business finance and secure the best possible outcomes for their ventures.
For the full session, please click here. Kirsty McGregor covers the following areas during this session:
- The latest picture in the lending market - the general commercial reality plus some other less well-known sources with special schemes
- Should companies generally avoid being in debt?
- How lenders use tech and credit scores to make decisions in 2023 & how is this changing yet again?
- Playing them at their game – how using technology can give you the upper hand
- Delivering value to clients (& fees they will gladly pay)
- The longer term picture
- 5 tips to help your client avoid ending up with a bad deal
The contents of this article are meant as a guide only and are not a substitute for professional advice. The author/s accept no responsibility for any action taken, or refrained from, as a result of the material contained in this document. Specific advice should be obtained before acting or refraining from acting, in connection with the matters dealt with in this article. The information at the time of publishing was accurate and could be subject to final changes.
