DEBT SOLUTIONS

While debt financing does not typically involve any ownership control, there are various covenants found attached to most debt instruments that must be met in keeping the company receiving the loan out of receivership, and the like.  UBA can work with clients to review and analyze the various options and resources to create the “best” solution.

Length of the loan, interest rates, security and other terms vary greatly.  Research is important in securing the most favorable terms; and, this generally takes time.  There are a variety of loans available – you will want to match the type of loan to your specific need.

            Types of Loans from a Commercial Bank:

1. Short-Term:  These loans are for short periods, 30-180 days; they are usually made to cover temporary or seasonal needs for inventory or personnel.  Common for established businesses, this type of loan may be hard for a new business to obtain.  Repayment is usually made all at one time, with interest.

2. Medium to Long-Term: These loans may be repaid over anywhere from 1 to 5, to even 20 years depending on how the funds are used.  The source of repayment is the cash flow of the business.  Typical uses are for equipment, fixed assets, etc.  Most loans to start a small business will be of this type.  Some variety of collateral will be required and repayment will probably be a monthly payment of principle and interest. 

3. Real Estate Financing: Real estate is typically financed over a fairly long term: 10-20
   years; but it is not unusual to see a balloon payment after 5 to 7 years.  Expect a down payment of at least 20%, although there are some loan programs that will acceptas little as 10%. 

4. Accounts Receivable Financing:  A bank, economic development resources, and some private companies may lend money on accounts receivable pledged as collateral. 

5. Line of Credit:  Revolving Lines of Credit are the most common and least expensive form of business financing for small and mid-sized companies. typically the LOC is used as working capital, which is generally the amount of current assets, less the amount of current liabilities. 

6. Senior Term Debt.  This type of debt is the second most common form of financing for small and mid-sized companies.  

This covers the very basics of debt financing from the standpoint of what may be available to a private business from a traditional bank.  UBA has a variety of sources for this type of financing, as well as other, more non-traditional type financing through various institutions and other sources.  From SBA loans, to micro-loans, there are many sources for funding.

Debt financing is the cheapest form of money available to private companies.  In a growth situation, debt may be more advantageous than equity – but, each situation is different.

 UBA is happy to assist in the analysis of any situation, and lend assistance for financing solutions.