“I sincerely believe that banking establishments are more dangerous than standing armies, and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale.”
Depending on the type of business you operate, you might need to make some hefty purchases. Knowing the smartest way to finance these expenses — and how to keep the interest payments low — are vital for you and your business. We recently discussed the importance of keeping costs to the bare necessities. When you have to shell out for these necessities, do you want to save hundreds or thousands?
Let’s look at the ways to spend or borrow wisely.
Leave Me A Loan
If yours is the type of business that requires a space build-out or industrial strength pieces of machinery, like vats for a brewery, then you’ll probably want to secure a loan from a bank or alternative lender. These are capital expenses that you will not — and likely, cannot — pay for up front, but lenders would see the value in these investments.
Traditional banks can offer as much as $5 million loans, but they are not always so keen on small businesses, as they historically consider them risky. Alternative lenders offer a bit less — in the sub-$1 million range — but are way more flexible and may be willing to bet on you even if your needs are unconventional. The time and interest rates you pay will vary depending on who your lender is, but generally, loan interest rates can go as high as 12% in monthly repayments.
What’s In The Cards
We’ve all seen those heartwarming commercials featuring the impact of major banks’ small business credit cards. As long as you make your minimum payments on time, having that card can be as good as advertised. Your business credit card has a typical limit of $50,000 and should be used for short-term financing. Those fancy meals I’ve advised you to trim down on are a perfect example of what you can charge, along with typical business and office supplies. Rack up your points on here and try to reap some benefits.
Do your best to keep your personal and business cards separate, just as you would your personal and professional email accounts. It is too easy to confuse the two and you will accidentally charge something too big or too small on the wrong card.
Depending on how long you’ve been in business, you might not qualify for a card. Some want you to have demonstrated some longevity so that you can pay it off. One suggestion is to call the company with which you already have a personal card to see if that might help you expedite the process (assuming you’re in good standing with them).
Your comments are making their way to the posts, so always feel free to leave more or contact Brinen & Associates to discuss how your small business can responsibly borrow.