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3 Tips On Managing Your Corporate Debt

3 Tips On Managing Your Corporate Debt

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...
3 Tips For Expanding Your Business To New Markets

3 Tips For Expanding Your Business To New Markets

After seeing some success in your business, it’s natural to lean towards expanding your operations to a completely new and difference audience. However – much like forging your idea into a successful business – establishing yourself in a bigger market is much easier said than done. Customs, international business protocols, and consumers needs/wants are just a few factors that can cause challenges to your business. Here are three tips to keep in mind when thinking of expanding your business internationally.   Keep in mind the cultural differences Regardless of how you pitched your business domestically, when entering a new market or location, your pitch needs to be adjusted to meet local standards. That could mean either adjusting the content, format of your pitch, and maybe even your product. In some cases, a major overhaul might even be required to successfully pitch your business abroad. What’s important is that you look at the market you’re attempting to enter and research the potential changes that need to be made earlier on.   Plan to spend Establishing your business in a new market is extremely expensive and requires a lot of funding, and the closer you get to launching your product/service, the more you’re going to need to spend. Whether you have enough money reserved or you need to raise additional funds, you need have a good idea of what to expect when it comes to how much you’re going to be spending in order to establish yourself in this new market.   Embrace your track record Just because you’re moving to another market doesn’t mean that you should forget about the...
5 Advantages of Debt Financing

5 Advantages of Debt Financing

When a company has immediate or short-term financial needs, it can finance these needs by issuing debt. Debt financing, in layman’s terms, is borrowing money from investors or lenders and promising to pay them back the full amount, plus interest, in a predetermined length of time. Firms commonly issue debt by way of the sale of bonds, bills, or notes to individuals and/or institutional investors. Here are five advantages to using debt as a method of financing your business needs:   No future lender’s claims: Once you’ve re-paid a lender in full, they have no direct claim on your future earnings. Even if what this loan paid for resulted in your business’ revenue/profits/assets to double, the lender is still only entitled to the face value of the loan plus interest.   You maintain complete ownership of your company: Other methods of financing may require you to dilute your share of your business in exchange for financing, whereas debt simply renders you obligated to pay back a loan to the investor that lent it to you. Once that investor has been re-paid the agreed-upon amount in the agreed-upon time, your obligation to them is over and your business engagement is completed.   Fulfilling short-term needs: Debt financing can easily be secured in a short amount of time on a short-term basis. This makes it quick and easy for smaller businesses to finance short-term business needs.   Tax deductions: In most cases, the principal amount and the interest payments on a business loan can be classified as a business expense, and thus can be deducted from your business income taxes. This...
5 Smart Questions to Ask a Business Lender

5 Smart Questions to Ask a Business Lender

Though it may be easy to find a bank that provides business loans, it is best to make sure you find an institution that fits who you are, what you are doing and where you are going. If you are looking to borrow money to finance your business growth, here are five smart questions to ask potential lenders.   1. Are you really prepared to meet my lending needs? If I needed money today, would you be able to provide it? This is an important question for every business owner to ask a potential lender. You need to make sure your bank has the resources to finance not just your business, but many others.   2. Do you understand my reason for borrowing? Some institutions will not lend to casinos, others do not fund restaurant ventures or acquisition loans. You want to make sure your bank knows what industry you are in and why you need more capital. It is a mistake to not be honest and precise when talking to your lender about a possible loan.   3. What are the risks to loan repayment? There are many financial risks, and there are many variables. Your lender should help you pinpoint the risks you face as well as assess where your business stands. How much debt does your business have today? Iis your industry to the business cycle? Are changes in technology something that could disrupt your ability to grow? 4. Can these risks be mitigated without adding tough terms to your loan agreement? Once you have identified and assessed the risks, you can work with your lender...
5 Tips to Better Manage Corporate Debt and Financing Relationships

5 Tips to Better Manage Corporate Debt and Financing Relationships

Line of credit, a term loan, or some other bank credit provision. If you have any one of these tied to your bank account (or plan to in the near future), take solace in these five tips to better manage your corporate debt as you scale your business.   1. Negotiate better interest rates with your lenders Move away from the idea of being just “the applicant” and get the lenders competing for your business. Let the lender know you are surveying the market to find a financing plan that specifically fits you. The conversation might sound something like  “Tom, we are in the midst of interviewing a number of banks to see who we want to work with. May we ask a few questions to see if your institution is a good fit for us?”   2. Negotiate an amortization schedule that fits you The longer you pay off the loan, the lower the payment will be. A loan amortized over five years will require a lower payment than a loan amortized over two. A loan amortized over ten years will require a lower payment than a loan… Well, you get the point. The goal is to minimize your required payment to protect your cash-flow in the event there is a short term dip in your business. But be on the watch for hidden fees (see below).   3. Discuss eliminating hidden fees Be mindful of the small print and negotiate strongly to eliminate (or at least minimize) hidden bank fees. Looks for things like “origination fees,” “payment processing fees,” “automatic rate increases,” and “prepayment penalties.”   4....