Partner Article

How to Lower Your Small Business's Borrowing Costs

Borrowing is a vital part of any business, and can contribute to business success over time. In this post, we’ll examine ways in which you can minimize your borrowing costs, leaving you with funds that you can shunt to other areas of your business that may need a boost.

Review Your Credit History

Your credit rating determines the interest your business loan will attract, and may mean the difference between getting a loan or not. It’s a good idea to get in touch with a financial adviser or credit bureau that will be able to make sure that your business credit history is up-to-date and accurate. This is particularly important given the rising incidents of identity theft across the country, which might hit your business without your knowledge.

Apply For Credit in Good Times

When you start contemplating to expand your business, this becomes a great time to borrow money. This is because expansion is related to business success and growth. Banks and lending institutions are more likely to offer you a good rate at this time given the fact that they will associate business growth and success to your ability to pay back the loan in good time.

At the same time, you may think of borrowing to fund business expansion even if you have enough finances to cover the cost. With the extra money you’ll have, you’ll be ready for any unexpected expenses while at the same time depending on the revenue you’ll get as a direct result of business expansion to cover the cost of the loan. This is a win-win situation that puts more money in your account at the end of the day.

Take Advantage of Your Home Equity

This is particularly important for people that run small businesses. This can also work if you need to expand your personal empire. This entitles you to a lower interest rate and flexible repayment rates compared to other types of loans.

Have an Overdraft Protection in Place

While providing you with peace of mind and safeguarding the future of your small business, overdraft protection will help you save on unnecessary bank fees and shield your business credit rating, which is vital for good rates when it comes to borrowing.

Have a Map Detailing Your Game Plan

This simply involves having a detailed business plan that is flexible and in line with current lending rates. A good business plan will give you a rough idea on whether you will need to borrow in the future, and at the same time selling your business vision to bank managers and lending brokers.

A business plan will also give a clear map on how much to allocate a given project. With this information on hand, you’ll be able to work with your bank manager and agree on repayments depending on when you plan to carry out the different projects in your business plan.

It’s vital to match your financing to your goal; for example, you can use a term loan for longer-term acquisitions such as an expensive piece of office equipment. On the other hand, if you need to buy business supplies, you could use a designated debit or credit card. At the end of the day, preparation when it comes to making smart lending decisions is what is needed to help grow your small business.

This was posted in Bdaily's Members' News section by steve hannigan .