A Detailed Guide To Debt Financing


Debt financing is one of the ways your business can finance its operations. This process requires the business to borrow money and fund working capital and other operations. You need to pay this money back at a certain future date with a specific interest. Now the problem is, even if you have a short history of poor credit history, it might be impossible for your business to secure a bank loan in the future. With the introduction of debt financing, the need for more efficient tax planning also arises. That is when the role of tax consultants in Calgary comes in.

You can consult with the tax consultants in Calgary to understand how to manage taxes in the process. In debt financing, you must know what’s going on and the options that you have to make your business flourish.

How does debt financing work?

Debt financing comes in several forms. The three key ways debt financing creeps into your life  are:

·         Line of credit

You can get access to a set credit line with a credit or revolving loan. With the line of credit, you need to pay only interest on the funds you use. Also, your credit line resets once you have repaid the amount you have borrowed.

·         Cash flow loans

In this case, you get an advance of funds on the basis of your revenue. Cash flow loans let you receive the percentage of revenue excluding the lender’s fees instead of having to pay back the money over time. You can also talk to professional tax accountants in Calgary to know more about cash flow loans.

·         Business term loans

You get to borrow a certain amount of money, get a lump sum amount upfront and eventually pay the money back with interest during the term of the loan. The loans usually consist of a fixed payment schedule.

It is always better to consult with professional tax consultants in Calgary before you dive into debt financing. One wrong step can make your entire business crumble down.

What are the risks associated with debt financing?

If you are thinking debt financing has no cons, you are wrong. If not dealt with carefully, debt financing can make things difficult for you. The main cons of debt financing are:

·         The company might be in trouble if it fails to pay off the interest.

·         The more you need debt financing, the chances are the debt providers will make their terms and policies even stricter.

·         In case of a large amount, it can quite a long time to arrange the debt.

·         The use of cash for the debt can go down the gutter if you don’t have a solid business plan.

Whether you need help with your personal tax account or business tax account, we have eminent tax consultants in Calgary to assist you. You don’t have to type ‘tax advisor near me’ on Google anymore. Just get in touch with us directly.

Location: 2635 37 Ave NE, Calgary, AB T1Y 5Z6, Canada

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