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Debt Finance

Debt finance is one of the most common types of finance for small and medium businesses. Funding through debt can be a useful way to access the finance you need to grow your business in Cheshire and Warrington.

What is debt finance?

Debt finance or debt funding is a way for businesses to raise capital through borrowing, with the funds that have been borrowed needing to be repaid at a later date. The repayment of the funding is agreed when taking out the funding and will be for a certain period over time and at a pre-agreed rate of interest. The finance offered will usually be ‘secured funding’ meaning it is offered based on the security of an asset that you have, which means that if you fail to repay the money, the asset may be claimed by the lender, towards payment instead. Unsecured funding, means that any assets you have are not considered/needed to ‘secure’ the finance. A limited company would still require a Personal Guarantee from directors to a level discussed appropriate by the lender.

What can debt finance be used for?

Debt finance can be used for a wide range of purposes, including starting a business, buying equipment and stock, investing in premises and growth plans. There are so many ways a business can utilise debt finance, but quite often you will have to agree with the lender what you will be spending the finance on.

The amount of debt finance your business can access will be dependent on information like your business credit rating, personal credit rating, business plan, current debts and assets and planned expenditure.

What are the types of debt finance?

The most common types of debt finance that are used by businesses are:

  • Loans
  • Overdraft/Invoice discounting – “working capital” facilities
  • Asset Finance - Leasing and hire purchase
  • Stock Finance
  • Commercial mortgages
  • Trade Finance



How can I access debt finance?

There are a variety of organisations that offer debt finance, the most commonly used is still banks and businesses with existing business bank accounts are usually best approaching their current bank first, as that bank is in the best position to understand what financial position your business is in.

Other sources of debt funding including:

  • New challenger banks
  • Peer-to-peer lenders
  • Specialist debt providers
  • Specialist loan funds

How do I decide if debt finance is right for my business?

Like most critical business decisions, it is best to speak to an expert when considering whether debt finance is right for your business, particularly if the debt you will be taking on is a large sum. The Growth Hub can help you understand the implications of debt finance and can help you consider what other options may be suitable.



  • Can be cost-effective, especially if you are looking for short to medium term finance
  • Repayments are a set amount on a set date, allowing you to plan your cashflow
  • You retain control of all your business, unlike some other types of finance


  • The debt must be repaid even if the business isn’t performing well and if not repaid in the agreed ways has the potential to lead to your assets being taken as payment.
  • It can be based on your personal credit rating as well as your business’ credit rating, which can make things more complex as one can be impacted by the other.
  • It can be more difficult to access debt finance if you have no business track record or have a bad credit history


How do I decide what type of debt finance is right for my business?

As previously mentioned, it is best to speak to an expert when considering which debt finance option is most suited to your business. The Growth Hub can help you understand the specific types of debt finance available and guide you to consider which type may be most suitable and can also advise you on how to prepare your business to be in the best position before making an application.

The Growth Hub can also help you explore a range of suitable providers of debt finance, some questions for you to consider when deciding what type of debt finance will work for you are:

  • How much do you need and how much can you afford to pay back each week/month/year?
  • Can you provide the up-to-date business accounting information that is often required?
  • Will you be able to produce the financial projections needed to prove you can make the required loan repayments in addition to existing commitments?
  • What assets/security do you have and what are you prepared to provide as security?
  • Which repayment method will work best for your business?

If you need support to understand more about debt finance or want to discover what debt funding options are most suitable for your business or how you can prepare your business before making an application then please contact the Growth Hub.