6 Reasons to Consider Debt Financing in your Business
Lines of credit, merchant cash advances, small business credit cards and term loans are all types of debt financing. At one time or another, most businesses will need some form of financing. In fact, it is one of the most common types of financing that there is. When trying to find the right type of financing, it’s important to explore any and all of your options. No matter what type you choose, here are six reasons why you should consider financing.
You Keep Ownership
In some cases, a business may offer capital in exchange for equity. In these instances, the business owner has to part ways with some amount of ownership of his or her company. With this type of financing, you never give up ownership. You keep your company. You never give up any of your collateral unless you default on the loan.
Management Retains Control
Since you get to keep ownership of your company, you also get to keep control over management decisions. If you were to use equity financing and give up some of the stakes to your company, then you would have to listen to another party.
Interest is Tax Deductible
No matter what type of financing you received, any money that you borrow for your business is tax deductible. You are allowed to deduct all business expenses and interest that you pay or accrue during the year.
Taxes Lower Interest Rates
Due the tax advantages, you have to adjust your interest rate when it comes to debt financing. The interest rate is actually lower when you consider taxes. It’s one of few times where taxes help your profits.
Accessible to All Businesses
When it comes to raising funds, some financing isn’t accessible to small businesses. With this financing, it is accessible to everyone. Whether you have small or large business,
Improves Credit Score
If you make timely payments to your lender, then your business score should improve. This is one of the biggest advantages of debt financing. Your business credit score should be separate from your personal finances. This allows for vendors and lenders to see that you are a responsible business owner. If you’re responsible with your financing then it can help boost your business’s credit worthiness.
Debt financing is crucial to keep your business afloat and to help it expand and grow. When it comes down to it, there are more advantages to it than there are disadvantages.