Credit Or Private Investor
Would you like to develop your company further, focus your business areas more clearly or establish yourself in international markets? And you need additional capital to realize your plans? Then you can either take out a classic loan from your bank or get a private investor on board.
Credit – the classic way of financing
Loans are certainly the classic way of financing. Do you have securities (including your private assets) and can you arrange monthly payments at fixed interest rates over a long period of time? Can you imagine fixing yourself for a few years now and only then, when you can’t go back any further, negotiating the conditions for further financing of the amount still to be paid? Then talk to your bank – even if banks are currently regarded as problematic partners. You have granted loans to countries such as Greece, Italy, Spain and Portugal. But these countries are now threatening to default as debtors. What will happen if your bank cannot cope with this default is currently completely unclear. In short: Since the economic situation of the banks is uncertain and it is unclear what problems can arise with follow-up financing, the entrepreneurial risk of applying for a long-term loan today is high.
Private investors – an alternative to bank loans
Private investors can be an alternative to bank loans. They range from business angels, who usually invest a maximum of five to six-digit amounts in the founding of a company, to venture capital for young companies with a small amount of millions, to private equity for solid medium-sized and large companies with financing sums of 10 million euros and more. Whatever you need: With private investors, you bring more owners into your company – but owners who are committed to ensuring your success. Owners who don’t look at your securities, but discuss the prospects for tomorrow with you.
As an entrepreneur you have another clear advantage, because you only pay money in the form of dividends if your company develops positively. Here you will usually find people with an entrepreneurial mindset who have a keen interest in your company growing. And the chances of finding a suitable investor are not bad at the moment: In the current difficult economic environment, investors are increasingly looking for opportunities to invest their capital with interesting prospects, but also with as much certainty as possible. As a result, small and medium-sized enterprises are becoming more and more important.
Tip 1: Private Equity
If you have decided that a private investor suits you and your company better than a bank loan, you need to clarify further questions: Do you only need the investor’s capital? Then a pure investor, who stays out of the operative business and only talks to you about finances, is sufficient. The crux here: If you have to argue professionally because raw materials become more expensive, new technologies require further investments in order to remain competitive or the competitive situation suddenly changes, then you often fall on deaf ears because you only talk to financial specialists.
Tip 2: Private equity and specialist know-how
Is it important to you that your financial partner also understands your business and has specialist know-how? Then you have a partner on board who can also think for you in your fields of business and who can assist you with his experience and helpful tips. And you understand when markets change and products have to be adapted.
Tip 3: Participation through an industrial holding company – money, know-how, synergies
You may want to expand and network your business even further to benefit from the know-how and market access of other companies that can complement your offering. From companies with whose knowledge you can jointly bring new products to market that none of you could develop on your own. Then your partner could be an industrial holding company with a network of shareholdings that create mutual synergies for the individual companies. Specialists speak of a buy-and-build strategy for the investor.
So there are many ways to find the right financial partner for your company. Take your time for a thorough research – with the right partner at your side you can look positively into the future even in turbulent times.
Leasing or credit financing? First aid for choosing the right form of financing
The question for practice owners is: Do I finance my investments better via leasing or bank loans? What is cheaper? A well-founded decision on the right financing instrument takes into account many details of the investor’s individual economic and financial situation. This article highlights key criteria that play a role when comparing the two financing options. |
An elementary aspect is the design of contract terms. With technically clean investment financing, care is taken to ensure that the economic useful life and financing term are roughly the same.
In the case of loan financing, the contract term is usually based on the tax depreciation period of the capital asset. This ensures that the repayment portions included in the loan installment are offset by an equally long tax relief item as a result of the depreciation. As a result, the financial viability of the rate is optimally designed for the practice owner. According to this principle, treatment units, for example, are credit-financed over ten years.
In contrast, the leasing contracts offered for these capital goods often only have terms of four to six years. These terms, which are short in relation to the useful life, are related to the fact that the leasing companies pay attention to a sufficiently high residual value in order to limit their financing risk. Shorter financing terms naturally result in higher installment payments. There are no objections to this if the practice liquidity fits. However, it can be observed time and again that it is precisely at this point that wrong decisions are made because practice owners are too optimistic about their ability to pay. Longer leasing terms are sometimes offered by the companies on request; however, a condition surcharge is to be expected.
The nature and extent of the investment
The scope of the planned investment also plays a decisive role in weighing up the appropriate financing option.
Leasing advantageous especially for smaller purchases
If it is “only” a matter of smaller investments in a device (for example a new steri or a prophylaxis unit), the leasing contract is a pragmatic way. Upon request, the leasing offer is sent directly from the depot and the matter is quickly settled.
In this case, there is nothing wrong with a leasing contract: the differences in terms and conditions compared to a bank loan are negligible due to the small total amounts. In addition, the great advantage of the usually very fast, efficient handling of leasing contracts also applies here. There is no need to spend time talking to the bank; perhaps the bank consultant is even happy not to have to deal with a small credit request, which he can only process economically if he charges high processing costs.