It often becomes a fact that small businesses can have trouble sourcing reasonable finance which will actually help them build their business. However making the best use of debt can in so many ways help you build your business a lot more quickly then otherwise possible. It is making the best use of debt and not exceeding your needs which will allow you to really grow your business.
The biggest challenge for the small and home based business is finding just what finance is available to them. With many small businesses operating as a sole trader not all of the traditional finance options are available, which also drop again when your business has not been operating for long. This is what makes it important to consider if you are using debt to the best advantage of your business and only for things that you really need it for.
While this could be seen as financial advice, i am not a financial adviser and it is recommend that you consult your accountant or other financial adviser before undertaking any of the method’s used here as they have worked for me, but the same may not work for you. No responsibility is assumed by myself should these methods adversely affect your business.
Hire Purchase Finance
When starting a business there are many different items that you may need to operate the business, such as computers, office equipment, and furniture. These products are often available through leasing or rental agreements which can greatly benefit your business right now and in the future. The biggest advantage that is immediately evident is the fact you do not have to outlay a large sum of money right now, and rather pay a smaller monthly payment. When it comes to your business though beware of interest free options, and discuss it with your accoutant that you will be able to properly deduct within your taxes.
Credit card Facility
Due to it often being difficult for new and small businesses to get true business financing facilities with banks, making use of a credit card can be an attractive option. The key to making it work though is knowing just how the card works. Different banks will offer different interest free periods, and this is the one thing that is most important to watch. Often paying the Outstanding balance by the due date will avoid any interest charges but be sure to find out. Avoiding the interest charges is the key to making this a profitable, rather then costly strategy.
Supplier credit accounts
While often not available immediately to new business, after a short time trading many wholesalers may make credit accounts available. Taking advantage of these accounts can greatly improve the way that money movies in and out of your business. Often just as good if not better then a credit card, due to better payment terms and no interest. While some people see supplier accounts as a hit and miss affair, taking the time to build a good trading relationship with your suppliers will help you get these account much easier.
Profiting from the use of debt.
While making use of this debt to make purchases and such, you need to be looking at the other side which is bring the money in from sales. Maintaining the lowest number of days to receive money back to the business from sales is greatly important. As soon as you have money coming in you need to be looking at putting that money into an interest bearing deposit account and keeping it there until it is needed to pay credit cards, suppliers or other required payments. This is one place that you can quickly add some additional profit to your business.
Make use of debt, but just remember, using it incorrectly will cost you money, paying attention and making good use will save and in some cases provide you extra money. Just beware and remember, to discuss this method with your financial planner first.