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Advice and Planning

New Year’s Resolutions for Your Business

New Year's Resolutions for your business

Happy New Year!  How are those resolutions coming along?  It’s always nice to have a fresh start.  So did you make any New Year’s resolutions for your business?  Hopefully it’s been a great year so far and you are already setting the course with resolve for your business success in 2017.  Whether it’s a new year or just a new day, it’s never too late to take steps to make your business financially stronger and healthier. Need motivation?  Imagine a year-end where you are not scrambling to pull paperwork together for your lender in order to get financing for an equipment purchase to take that recommended deduction needed.  Or, throughout the year, having the ease of a line of credit available to pay your vendors in a timely manner - - even taking advantage of any vendor’s 10 day discount terms offered.  No more shuffling 30 day invoices to determine which ones to pay or missing sales because past due invoices are preventing you from fully stocking your inventory. As you plan to meet with your accountant also plan to set up a meeting with your lender.  Discuss your upcoming financing needs and options which may include: Real estate loans - are you out growing your current shop, looking to expand to other locations or considering going from leasing to owning real estate.  Often business property loans are financed with a 20 year amortization and a 5 year balloon so if you have an existing loan on your building that balloons within the next 2 years, it may make sense to look at refinancing this year while rates are still lower. Lines of credit and Business Credit Cards:  revolving debt serves a purpose to cover short term asset purchases such as inventory or to carry those accounts receivables that absorb your cash.  Lines of credit offer the flexibility of quick access to funds as needed with the ability to pay it down or off when cash is flush.  Rates are more attractive than credit cards. Using a credit card to pay a vendor or short term expenses may allow you to make payment with a no interest if your projected net cash available will allow you to pay it off in full each month.  You don’t want to be using your business credit card if your cash flow cycle is going to be a longer period where you can’t take advantage of the grace period since the rates are much higher than a line of credit.  Don’t get enticed into juggling debt by using credit cards with the limited time 0% rate offers as most come with a 4% or 5% transaction fee which looks great compared to typical credit card interest rates but it is an upfront expense tied to the use of the money.  Also, in most cases, if that credit card isn’t paid within the designated grace period, interest is collected retroactive from the day of your advance (in addition to the original advance fee). Term Loans:  it is important that your loans are structured correctly so that the term length of your loans match the life of your asset financed.  You don’t want to use your revolving debt for long term assets such as equipment purchases, down payment on capital purchases or building improvements.  If you did advance your line for a capital purchase out of convenience, look at options with your lender to get that portion financed correctly through a term loan so your line is available when you need it for short term cash flow crunches.  Some lines of credit require that the line be paid off or down to a certain level during the year for a set subsequent number of days.  If you are growing fast in sales as well as in receivables, your line of credit needs may grow as well so review your projected cash flow budget with your lender before you’re stretched.