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Short-term vs long-term financing

Posted on August 18, 2019 by admin

Maintaining healthy cash flow can be challenging; between ongoing expenses and bills, poor cash flow can severely impact your customers, staff and bottom line. Business owners need to understand the differences between short and long-term financing when developing a cash flow strategy.

There are various sources of financing available, with each being useful for different situations. Choosing the right source and mix is key for good cash flow, with financing options often being classified into two categories based on time period: short-term and long-term. To find the right plan for you, determine your needs and then match a financing option to meet those needs.

Short-term financing:
Short term financing, or working capital financing, looks at needs that arise in relation to financing current assets – for a period of less than one year. Working capital is the funds that are used in the day-to-day trading operations of a business. Short-term financing can help you to pay suppliers, increase inventory and cover expenses when you do not have sufficient cash on hand.

Long-term financing:
Long-term financing options can help you invest in overall improvements to your business, for a period of more than 5 years. Capital expenditures, such as upgrading equipment, buying additional vehicles and renovating are funded using long-term sources of finance.

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Getting to know your credit score

Posted on September 17, 2019 by admin

Your credit score is an important number in your life as it can affect many financial aspects of your life. The three-digit number is a representation of your credit history, based on an analysis of your credit file, that helps a lender determine your credit worthiness. When an individual applies for a loan, such as a mortgage or car loan, the provider will use a credit score to help them decide whether to lend the money, the amount to lend and the interest rate.

An individual’s credit score is calculated by credit reporting agencies who collect financial and personal information and document it on a credit report. The information is then used to calculate your credit score. Areas agencies assess are;

A credit score is rated on a five-point scale with the position of your credit score on the scale helping lenders work out how risky it is for them to lend to you. The scale goes excellent, very good, good, average and below average.

To prevent a negative credit score, individuals should try to spread applications over a larger amount of time; lower credit card limits; ensure their credit card is paid in full each month; and pay their rent, utilities and other loans on time.

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