Nobody likes to pay interest

We completely get it; Nobody likes to pay interest, neither do we. It’s an emotional hot topic for any business person when it comes to financing equipment or acquiring working capital. They feel that it is like money thrown in the air… or not? Interest is the price you pay when you use someone else’s money to finance something. So why not pay cash and eliminate interest? When business people tell me that, I reply, “if you have unlimited cash or if you have enough resources to pay cash it won’t jeopardize the cash flow of your business, then go ahead.” I never argue that point because it’s emotional. But the warning must be clear; It is not wise to pay cash for something that cripples your ability to have capital for emergencies, market changes, market opportunities, or expansion. If your market changes and sales slow, going to your bank and borrowing capital can be difficult; It’s not going to be easy because traditional lenders don’t take risks and lending to a business with a downward trend is “risky.”

Financing assets along with paying interest allows you to preserve your capital and the longevity of your business. Of course, the financing payment has to make sense; it has to fit within your monthly budget and the asset must contribute one way or another to your bottom line. It should make you money or save you money. The third contribution is more difficult to measure and may be image and good will; If you’re a custom interior kitchen retailer, then investing in a modern showroom for your customers to view your products can be invaluable and give you a high return on your investment, but again, it’s a little harder to put an exact number on. In any case, the financial investment still has to be manageable within your budget.

While no one likes to pay interest, it should be considered simply as part of your ROI calculation to ensure you’re making the best use of your new equipment. How to get the lowest rate? your personal FICO as high as possible and have a service fix it if you have problems, review your D&B business profile and make sure it is accurate, if there are tax liens then set up a payment plan and have it documented and in place that shows you have taken the right steps to resolve them and finally have a service, bookkeeper or accountant prepare your financial statements which will indicate that you are organized and running your business seriously. In the long run, if managed properly, the financial interest you pay will actually pay you back.