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A lot of small businesses seek financing when they first enter the marketplace, and while borrowing money can often be helpful, careful consideration should be made as to the timing of the loan, and its terms.<br><br>
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A lot of small businesses seek financing when they first enter the marketplace, and while borrowing money can often be helpful, careful consideration should be made as to the timing of the loan, and its terms. Pay close attention to the potential pros and cons involved with the decision to take out a loan, as listed below, and if you need further clarification, seek professional help. Pro: Loans for business expansion and growth
Whether your business has just started up, or has been functional for some time, seeking out a loan often makes a lot of sense in business terms, provided your intention is for it to help expand the business and encourage growth. Perhaps you want to explore a new line in products or services or buy some extra property? Any actions you want to carry out that you anticipate (or at least, hope) will increase revenue, make borrowing money a legitimate and appropriate course of action to take. Additionally, if the business owner has put a portion of their personal funds into the company either as a one off, or over an extended period of time, a loan can help that money be rapid to them.
Con: Loans and their impact on cashflow As loans typically have to be repaid in monthly instalments, they can have a significant impact on a businesses cash flow, and it’s also worth considering the rate of interest, which may fluctuate according to market conditions. When you borrow money as a business owner, your tax deduction for expenses related to interest might well be restricted to just 30% of your company’s adjusted taxable income. That said, it may be possible for smaller businesses to deduct more than that. For more detailed guidance on this, a tax professional will be able to help you.
Con: Loans and the risks of taking on excessive debt By taking on excessive debt as the owner of business, you becomethe personal guarantor for the loan, meaning that should the business default on loan payments, you will be liable personally for making sure the balance of the loan is repaid in full. Under such circumstances, the lender may be within their rights to take actions such as seizing your car, home or any other assets you may own, in order to get the debt settled. In a worst case scenario, should your business end up with liabilities that outweigh its assets, and you are unable to repay the loan, you may be forced to take the difficult decision to file for bankruptcy.
Before you consider taking on any debt as the owner of a small business, it pays to thoroughly discuss your options with a tax or financial professional. They will carry out an in-depth analysis of your business overall, including its financial health, projections and cash flow, and help you decide whether taking out a loan at this stage would be helpful, and if so, how much debt your business can realistically afford to accumulate. At Heyer Inc, we proactively assist our individual and small business clients in meeting their goals. Our key area of focus is ensuring that our clients remain compliant with federal and state tax laws by providing them with high quality accounting and tax services Miami. If you are looking for an individual accountant in Miami, heyer inc would be a right option.
