What's next for your business
Whether you’ve spent a lifetime building up your business or have grown it over a few short years, we understand it’s a huge part of your life and figuring out what to do next can be an incredibly daunting decision.
If you’re considering refinancing any existing debt to make it cheaper, raising funding to support investment in the business, or using the capital to facilitate a sale of shares or dividends, this may be an option for you. It involves borrowing money from a bank or other lender (e.g. a private debt fund). Depending on the amount you’re looking for and the asset base of the business, it could be either a secured or unsecured loan.
When using debt financing, you will take out a loan or debt facility from a financial institution or bank and be obligated to make payments of interest and capital, in accordance with the agreed schedule. In some instances, a lender may consider an Interest Only option, particularly if the business is in a growth phase. Most loans will not affect your ownership of the business, as long as you make the repayments on time. You will be in control and know exactly how much you need to pay which can help with budgeting and future planning.
Depending on the status of your business, you may be able to achieve a loan that has a low-interest rate. However, if you have struggled historically to borrow money from your bank, there are plenty of other options available. It’s important to not get trapped in a cycle of borrowing so make sure any deal you go into is transparent. If you are unsure, always seek advice.
Having good business credit is essential if you’re looking for low-cost, long-term debt funding. Therefore, it’s important to build your business credit as this will help establish more favourable terms with lenders.
Another benefit of debt financing is that it may attract tax deductions. As appropriate debt finance is typically classified as a business expense, the interest payment on that debt could be deducted from your business income taxes. Overall, it can reduce your net tax obligation at the end of the year. Again, make sure to seek advice from a tax professional to make sure you are following correct protocols or ask general questions about how the debt will affect your tax obligations.
Understanding the funding landscape can be complex but is essential in order to make your goals achievable. There is a growing market of various finance options so it’s wise to get advice first to see which is best for you and your business. With this in mind, business owners will need to also understand the tax allowances and implications of using any debt and extracting funds.
Our advisors can support you through all stages of debt financing. We will work with you to:
If you would like to know more about debt financing contact your usual Mazars advisor or alternatively one of our experts via the form below or on:
Brisbane – John Kotzur | Melbourne – Brad Purvis | Sydney – Maximilien Amphoux |
+61 7 3218 3900 | +61 3 9252 0800 | +61 2 9922 1166 |
Authors: Paul Joyce – Partner, M&A, Zoe Davies – Partner, Tax Advisory and James Robinson – Senior Manager, Financial Planning
Published: 02/08/2023
All rights reserved. This publication in whole or in part may not be reproduced, distributed or used in any manner whatsoever without the express prior and written consent of Mazars, except for the use of brief quotations in the press, in social media or in another communication tool, as long as Mazars and the source of the publication are duly mentioned. In all cases, Mazars’ intellectual property rights are protected and the Mazars Group shall not be liable for any use of this publication by third parties, either with or without Mazars’ prior authorisation. Also please note that this publication is intended to provide a general summary and should not be relied upon as a substitute for personal advice. Content is accurate as at the date published.
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