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Ask Timpo: Should I go for debt or equity?

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A: Do you really need the extension so badly that you are willing to borrow money? Given the current economic climate and the tough line taken by most banks most companies are keen to create cash not spend it. Why not wait until your cash flow provides the money for the project.

If, despite my advice, you insist on pursuing this pet development go for debt. 

In the long run equity is always the most expensive way to borrow money. In five years time 50 per cent of your shares could be worth a small fortune.

Assuming you can find a bank to play ball take a careful look at their offer. Bank charges can bump up the real cost of borrowing and innocent looking covenants may come back to haunt you.

Would life be that bad if you put the extension on hold?

John Timpson runs high-street cobbler Timpson, which has 800 branches nationwide and sales of £150m. Got a question for him? Post it in the comments box below.

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