Whether that be a term loan, line of credit, or some other bank credit facility, a business usually has some sort of debt on the books. For big business especially, it’s important to know how to best manage your debt so it doesn’t hinder your growth or sink your business altogether. Here are three suggestions to better manage your debt as you grow your business.
1. Negotiate better terms
If protecting your cash flow is a key goal of yours, then making your minimum payment as low as possible gives your company flexibility to protect its cash flow. See if you can have your interest and principle accrue, or if you can have interest only payments due. You can always turn an interest only payment into an amortizing one by paying down additional principal.
2.Negotiate better amortization schedules
The longer it takes to pay off your loan, the lower your payments are going to be. If the loan amortizes over ten years, your payments are going to be lower than if it pays off over five. You may have to pay extra principle, but the key is to minimize your required payments to guard your cash flow.
3. Negotiate better interest rates
This may take a little tact and salesmanship, but the best tool to help you negotiate interest rates with your lenders is to get them competing for your business. This shift takes you out of the position of “applicant” and transforms your lenders into people trying to earn your business.