Last Updated on Apr 8, 2020 by James W
If you have a small business, then one of the main costs for you, and main factor that affects your profit is how much interest you will be paying. From loans to credit cards, there can be a lot of interest that you have to pay. Some of it will be necessary to get your business off the ground. But are you making some mistakes that are actually costing your business more money than it should? Here are some ways to avoid paying too much interest on those necessary loans for your business.
Choose The Right Loan In The First Place
As has been said, some loans really are necessary to get your business off the ground. But in order to reduce the amount of interest that you have to pay if any, then you need to be choosing the right loan in the first place. A site like smallbusinessloans.co shares that the average interest rate for a small business loan is just over 6%. So if you are looking into a loan for your small business that is way over that amount, then it is time to think again. That is the number one way to pay too much interest; choosing the wrong loan in the first place.
Avoid Credit Card Spend
Used wisely, credit cards can be a great benefit to you. They can be really handy, providing you with things when you need them. However, if you don’t budget well, it can lead to spending on a business credit card that you can’t pay off. And that is where the problems come in and the interest starts to rise. So be sensible about how much spend you put onto a credit card. If you’re going to spend on a credit card, then just do it when absolutely necessary. It is also a good idea to only spend on a credit card when you know you have a certain amount of cash coming in to pay it off straight away. So keep track of your budget and your costs and it will help a great deal.
If you have several loans or outstanding debts for your business, then it can be a good idea to consolidate them where possible. An article on moneysavingexpert.com shares how much easier it is to deal with your debt when it is all in one place. So instead of having loans with different people or banks, look at putting them all in one place. Quite often, it can mean paying less interest than if there are debts in several locations. It also helps if there is a way to get balance transfers, especially on things like credit card debt. Then you often get a reduced interest rate for a certain amount of time, to help you get on top of things again. So that could certainly be worth looking into.
Have you got any experience of the above points for your business? It would be great to hear any other tips or tricks that you might have.