Access to capital is one of the biggest barriers small businesses face when looking to implement growth strategies. Here debt can help. Businesses can rely on “debt” to fuel growth. Debt is a good investment option for business growth if used correctly. When does debt work? Debt works when it is used as a strategic tool to support your firm’s financial growth.
In Lending business, much of the initial growth of small lenders are funded on borrowed money. It’s obvious why- the tax benefits and the ability to retain ownership and profits makes debt the most attractive option. At the same time, we’ve all heard stories about profitable lenders growing too quickly and subsequently failing. These failure stories are often the result of businesses using an excessive amount of debt to fund their growth and expansion. This is because as your business grows, any increase in the cost of additional debt becomes a serious issue. This matters in an industry where the margins are razor-thin.
Debt Investment can help you jump-start your business, but only if it’s managed well.
A company’s cost of debt is the effective interest rate a company pays on its debt obligations. Reducing your overall cost of debt is critical to the success of your company. Here’s the key question: “Is the return from new investment higher than the cost of the new debt available?”
Its only when the return is higher, that the additional debt is worth it.
With the right approach, debt investment can be used as an effective tool for growing your business.
Tips to reduce cost of debt
- Transform business processes
- Effective repayment strategy
- Adoption of customer-centric product portfolio
- Efficient risk management
- Better insights on regulatory reforms
Insight Consultants Role
At Insight Consultants, we work with our clients to effectively and efficiently manage their debt with our advanced Technology and Finance Management Services
- Customized workflow engines to identify real-time performance trends
- AI powered analytics framework to generate valuable insights
- Investor dashboard with real-time financial data
- Effective fund management through advanced analytics
While taking on debt can be daunting, planning strategically, setting realistic expectations and carefully researching your funding options will put you on the path to successfully leveraging capital to grow or transform your business.
Contact Us to know more!
