Finance & Cash Flow
Borrowing is a tool. The mistakes come from not asking what it is for.
Some businesses borrow too late, when the lender can see how stretched they are. Some borrow too early, or for the wrong reason, and spend years repaying money that never produced anything. This session does not tell an owner whether to borrow. It gives a way of thinking through the decision, with an exercise to run the owner's own numbers, so that the choice is made deliberately and with eyes open.
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The same loan can rescue one business and sink another.
Borrowed money brings a fixed obligation: the repayment is due whether sales are good or not. That is manageable when the money is used for something that reliably earns more than it costs, and dangerous when it is used to postpone a problem. A business short of cash because customers pay late may need better collection, not a bigger loan. A business short of cash because it sells below cost needs a different fix again.
Many owners decide on borrowing under pressure, with the first offer on the table. Thinking it through before the pressure arrives, even once, makes the decision much better. This session offers a framework for doing that, and is honest that for some owners the answer will be not yet, or not this way.
What the session covers
34 topics across 7 areas. Seven questions an owner can ask before borrowing.
What Is the Money For?The most important question.5
- Growth: stock, a new line, another outlet, more staff
- Assets: machinery, equipment, a vehicle, a property
- Covering a gap: late customer payments, a slow season, an unexpected bill
- Rescuing losses: the case where borrowing most often makes things worse
- Why the purpose should decide the kind and length of finance
Matching the length of the borrowing to the length of the need is a principle worth asking your accountant about.
What Will Be Different Afterwards?A loan has to produce something.5
- What extra income or saving the money should produce
- How soon, and how sure
- What would have to be true for that to happen
- What the business does if the extra income arrives late or smaller
- Evidence versus hope
Where Will the Repayment Come From?The question every lender asks, and every owner should ask first.5
Participants run a simple repayment check with a made-up instalment and their own monthly cash picture. The session labels any illustrative figures as hypothetical and does not use real interest rates.
- Repayment from the business's existing earnings
- Repayment from the new income the money produces
- Repayment from the owner's pocket, and why that is a warning sign
- Instalments against the cash the business actually has each month
- What happens in a bad month
The Full Cost, Not Just the RateRead everything before signing.5
- Interest, fees, charges and insurance, and the total paid over the term
- Penalties for late payment or early closure
- Security asked for, including personal guarantees
- Why a lower monthly instalment can mean a higher total cost
- How to compare two offers on the same basis
The session does not quote rates or recommend lenders. Get current terms in writing from the lender.
The Worst CaseSay it out loud before you sign.5
- If sales fall by a quarter for six months, what happens?
- What is at risk: stock, equipment, a home, a relative's guarantee?
- What would you do, and who would you tell, in the first month of a missed instalment?
- Where informal borrowing and high-cost credit tend to lead
- When the honest answer is that the risk is too high for now
This is not meant to discourage. It is meant to ensure that a decision to borrow is made knowingly.
Alternatives to Consider FirstSometimes the cheaper fix is operational.5
- Collecting from customers earlier, or asking for advances
- Negotiating longer terms with suppliers, fairly
- Reducing stock that is not moving
- Pricing and cost changes that release cash
- Retaining profit, or bringing in a partner, with the trade-offs of each
Taking It to ProfessionalsWhere this framework ends.4
- What to ask a chartered accountant before committing
- What to ask a lender about the actual offer
- Why the decision, and the responsibility, remain the owner's
- How to keep a record of the reasoning behind a borrowing decision
What participants leave with
- A one-page borrowing decision worksheet to use again
- Their own repayment check using their own figures
- A worst-case note, written honestly
- A list of alternatives worth trying first
- Questions for a lender and for a chartered accountant
What this session is not
- A recommendation to borrow, or not to borrow
- Advice on any lender, scheme or loan product
- A source of interest rates or eligibility figures
- Personal financial, tax or investment advice
Who teaches it
- Chartered accountants and finance practitioners who advise small businesses
- People with experience of credit and lending in a small-business setting
- Owners who have borrowed, and can describe the decision and the aftermath honestly
How the session runs
Two to three hours, in a small group, with pen and paper or a laptop. The practitioner walks through the framework using made-up cases, clearly labelled as such, including one where borrowing helped and one where it did not. Participants then apply the same questions to a real or imagined decision of their own and share what they found. The session gives general education and does not replace individual accounting, tax, legal or financial advice.
What your students leave with
- A plain test for the purpose of a loan: what changes in the business because of it?
- The difference between borrowing for growth, for assets and for covering a gap
- A worked repayment check using their own figures and a range of outcomes
- A worst-case question they can answer honestly before signing anything
- A list of alternatives to consider before borrowing
- Questions to ask a lender and a chartered accountant about the actual offer
Scheduled sessions
Nothing scheduled yet
Sessions are arranged with a college once a date is agreed. Ask us and we will find the right person for it.
A student rather than a college? See what is coming up, or ask your placement team to host this.
Know what the money is for, and how it comes back, before it is borrowed.
Tell us who your students are and what stage they are at. Sessions are free for participants.