How does bank financing work, and should I use it?
Posted on June 21, 2013 by Shane Campbell
It’s rare that a company can effectively grow without the assistance of bank debt. Managed right, debt is our friend.
Purchases of equipment that will last several years should be financed over a term of 5-7 years so that the debt payments are matched by cash inflow from customers that buy the goods you created from use of the new equipment. These are referred to as “term loans.”
Working capital loans, or “lines of credit,” represent short-term borrowing that bridge the time from when you pay for rent, wages, material purchases, etc. , to the time customers pay you for delivered products and/or services. A good banking relationship is normally key to business growth
