All debt is evil

17 October 2016

Since the credit crunch, the mere mention of the word debt has been stigmatised. To such an extent that businesses across the country (and further afield) have sought to reduce, consolidate, and even clear debt from the balance sheet.

However, this policy can have drastic implications to the long term health of a business, as by starving a balance sheet of liquidity; assets are not renewed,refreshed or improved.

Example one

A company adverse to debt will not finance a new IT system that improves efficiency, quality and even staff morale (we all want new kit).Therefore finding the right balance with finance and debt is essential to ensure growth and long term stability.

Example two

When considering a purchase of a new asset for £100,000 a business has two options:

  • Cash purchase
    • a Cash purchase reduces cash, and without adequate cash flow projections can harm a business’s performance (VAT and Corporation Tax not paid may paint a false picture of liquidity).
  • Debt purchase
    • a number of instruments are available (asset finance, loans sale and lease back – even rental) all of which affect cash levels differently. The cash cycle of a business will (when forecasted) dictate which product is suitable.

Here at UHY we work with banks, funders and brokers to allow us to deliver the best debt products to our clients.  We can help with simple asset finance, invoice discounting, development finance, mortgages (residential and commercial), or complex mezzanine and private equity finance. If you would like to know more about the services we provide, please do not hesitate to contact your local UHY expert.