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How to Finance Your CA Firm?

  • Highlights

  • Flexi loans for CAs: Smart way to manage cash flow

  • Angel investors dilute your control

  • A partner adds resources, expertise and client base

  • Borrowing from family may hamper relationships

Your CA firm requires a timely infusion to funds to not only carry out day to day operations, but also to grow and expand. Some of the most common needs of a CA firm is to pay for office rent in the heart of your city’s business district, hire qualified employees and taxation experts, use the best accounting software and invest in short-term courses to be up-to-date with new laws and regulations. Thus, finding an affordable and convenient source of finance becomes paramount.

Here are some financing options that you can use to finance your CA firm:

1. Take a Flexi business loan for Cas

a. A Flexi business loan for chartered accountants is a customised offering that suits the various needs of a CA and helps them get a good interest rate due to the credibility of their profession and experience.

b. You can use this loan for financing working capital, acquiring new premises, opening a branch office or buying a new business asset. Its unique feature helps you meet unpredictable expenses associated with your firm with ease.
c. These loans are a smart way to finance your firm’s requirements as you save up to 45% on your regular EMIs and maintain a healthy cash flow.
d. It is a collateral-free loan of up to Rs.32 lakh having simple eligibility criteria, minimal documentation.
e. Another benefit of a Flexi business loan for CAs is that you have complete control over your business and don’t have to share decision-making powers or profits with anyone else, which may not hold true for other forms of finance.

2. Swipe your credit card

a. A credit card is a convenient way to finance your daily business expenses or instant payments.
b. This option offers you excellent flexibility in paying various bills. A credit card can also be used with systems like MobiKwik and PayPal to make online payments.
c. However, they are not suitable for high-ticket purchases. They could be an effective mode of finance for nascent practices, but for a growing practice there could be many instances where cash payments would be necessary. Credit cardholders may also end up overspending often not having a track of their expenses.
d. it is important to plan your repayment of credit card bills in advance. Unpaid credit card bills are subject to high interest rates and can stack up a huge debt. This affects your credit score negatively, and may impede future loan applications.

Additional Reads: Why should you choose a Loan for Chartered Accountants from Bajaj Finserv?

3. Attract an angel investor

a. If your CA firm shows the potential for growth, you can attract individuals who will invest in your company in exchange for part ownership.
b. An angel investor can offer you significant sums of finance, which you can use for various growth needs, be it setting up a new office or expanding operations to another location.
c. However, these investors may have some say in how you run your CA firm, and may not be the best choice if you want complete control of your business. You are also liable to share a significant portion of the profits and are accountable to your investors for your business’ performance.
d. Also, it is important to note that angel investors are more likely to provide funds at the seed stage. That being said, they may only invest until the business owner has also put his/her own funds at risk.

4. Get a partner

a. CA firms are often started in partnership to share the risk and responsibility of running a firm.
b. You can convert your firm into a partnership by asking a qualified friend or colleague to put in some money in order to become a partner.
c. It is important to choose your partner with care as you will share profits and make business decisions together.

Borrow as you need, prepay when you can

A Flexi Term Loan is a very efficient and smart way to tackle unplanned expenditure. When you opt for a Flexi Loan facility:
-You are given the maximum amount you qualify for.
-You can withdraw the funds you need right now pay interest only on what you borrow, rather than the whole loan amount sanctioned. The rest is available to you when you need it.
-You don’t need to apply for it again, or follow a time-consuming process to access. Just borrow more when the need crops up.
-You can prepay funds when you have excess income at no extra cost. You can even re-avail the prepaid funds if you need them.
-You can choose to pay interest-only EMIs to further reduce your cash flow management and pay off the principal at the end of the tenor.
-You save up to 45% on your regular EMIs.

5. Involve your friends and family

a. Borrowing finance from family and friends can be convenient, but be sure to draw up an agreement of repayment that is clear to everyone. The downside of this source of finance is that it may result in biased decision-making and strained or broken personal relationships if your business does not register continual profits.

Chartered accountants can also use a combination of these options to fund their practice rather than boiling down a single financing source.

The right funding mix for your practice depends on factors like your financial requirements are, the size or the growth stage of your practice, your risk appetite, your preference on the repayment plan, retention of ownership or stake, etc. Once you have clarity on these, determining the right mix of finance for your practice becomes a lot easier.

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