Financing Sense

Don’t want to pay any interest? Pay cash for your new equipment and you can be assured you are paying the lowest “rate”. If you have buckets of extra cash this might be the best thing to do but if you have that much extra capital that means your business is doing very well. What does a business do when generating lots of revenue? Expand the facility, expand the product line, upgrade the production system, get more employees, and invest in new markets which all will help continue to increase sales. Money spent in making your company more efficient or helping it grow is a much better investment than paying for capital equipment and saving a few percent in interest rate. That’s opportunity cost; the lost opportunity of not doing something more productive with your extra cash. The question is not how much interest rate are you paying; it is how much profit you are losing by foregoing a better opportunity.

We often have this discussion with small business owners but it applies to companies of all sizes. Though in some cases, the owner will reply “I’m happy where I’m at and don’t want to keep growing”. They are winding down their business, keeping things simple; they don’t need credit and don’t want debt so we respect that decision but for the other 99% of the companies we work with this isn’t reality and the goal is to invest and grow, grow, grow.

Borrowing less money has a higher rate than borrowing more money; borrowing for a shorter term has a higher rate than borrowing for a longer term. Having a riskier credit profile has a higher rate than a lower risk profile. Having valuable collateral can help mitigate any of the conditions which can push the interest rate up. These are the cornerstones of financing that never change no matter how clever that ad or commercial spins it. We can help get you financed at a competitive and fair rate for your specific situation and needs.