It is generally better to explore internally-generated financing to enable business succession as it involves maximising cash flow and controlling expenses according to Deloitte Tax Partner, Craig Holland.

In his eighth and final part in a series on succession planning he said there are numerous ways family businesses can improve internal cash flows in order for succession planning and business growth to become a reality.

“Business owners need to evaluate all expenses, have control of all purchase orders and sign all cheques just as a bare minimum in order to improve internal cash flows,” Mr Holland said.

“External financing may be a better way to finance growing businesses and ensure succession issues are in order, depending on the different circumstances of stakeholders of the business.

“The common types of external finance options are lines of credit, equipment term loans, industrial mortgages, investment by private individuals and funds from private equity investors.

“Family business owners need to realise they are unlikely to ever have complete control of their company again if they choose to sell equity or make the decision to go public."

Deloitte today released the eighth and final part of the series which provides different ideas about internal and external financing options which will assist family owners choose the most suitable financing options best suited to their circumstances.

Read the full report - Internal and external financing.