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Using banks to help fund a business

At some point along the growth path of your business, it is worth establishing a relationship with a bank that understands your industry and that is looking to back up and coming talent.

Believe it or not, banks are in competition with each other and employ new business liaison officers whose job it is to find and source new customers who have shown they have a business than can grow and, importantly from the bank’s perspective, repay their debts.

Early on, a supportive bank may well make available to you a personal loan which is a loan that you (not your company) has to repay.  Alternatively, they may advance a business loan to your company, but ask you (or a family or fiend) to provide a personal guarantee (or “PG”) to support that loan.  If you or the company does not repay the loan, the bank will seek to be repaid in full under the PG.

As the business evolves, you may be able to get access to different sort of trade finance, such as an overdraft (where the bank allows you to go into an agreed level of debt up to an overdraft limit but penalises you if you go over that amount) or a revolving credit facility (under which you can draw down funds and repay it from time to time and then, once paid, redraw)

Banks can be incredibly flexible and supportive – particularly if the business is growing and servicing its debt.  Note, they will always take security over the businesses they are lending to and thus if you default under your loans, you could lose the business. 

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