- 09 Feb
How To Free Up Your Own Money From Your Company For A House Deposit
Getting together the deposit to buy a house can be difficult, especially if you own your own business and you have put all your capital into making it a success.
Financing A Business With Your Own Money
We were recently able to help a client that was in such a situation. The client had put a lot of their personal capital into setting up their business and now they needed to find the deposit for a house purchase.
A lot of businesses are in this position, as it is common for people to use their own money to finance their businesses. Despite it being common practice, it may not be the best approach and there are alternatives to using your own money to finance a business.
Releasing A House Deposit
This issue comes into sharp focus when you want to raise the deposit to buy your own home. If your money is tied up in your business, you may need a way to release that cash for your deposit.
Invoice financing may be an option. Hopefully it goes without saying that you need to ensure that your company will retain enough working capital and you may need to consult your accountant about the implications of withdrawing large amounts of money from your company.
Invoice Finance Releases Cash
We were able to arrange an invoice finance facility for our client. This type of business finance releases the money that is currently tied up in unpaid sales invoices. When a company has a number of outstanding invoices this can add up to a large amount of new capital.
Increased Funding And Cheaper Cost
After the initial prepayment was released, our client was able to withdraw some of their own personal investment from their business. This enabled them to raise the money required for the deposit on a new house. In addition to achieving the objective, the facility we found them had a 25% higher prepayment than they were offered elsewhere, in addition to being quite a bit cheaper.
Providing the sales ledger is relatively stable in overall value, the amount of available funding from the facility should remain relatively stable (or indeed grow as the company grows). The difference now is that they company is paying for the finance rather than the company director who now has the cash for the house deposit.