Smart Financing - Be Your Own Banker
Here is a comment made by one of our wise Allegra Network franchise members regarding financing a new equipment purchase:
“For what it’s worth, I’m loaning the money to myself. The bank was willing to go 5 percent for two years, while my various accounts with them only pay .25 percent interest. It seemed like a no-brainer to pull .25 percent money out and loan it to Allegra at 7 percent for 12 months.
“Why pay the bank for money I have when I can pay myself more for the same monetary use? It messes up some financial ratios and skews operating costs, but it works out better for yours truly.
“It’s akin to buying the building a couple years ago and leasing the space back to my company at competitive, but high, market rates. Just another footnote for the company financials is all.”
If you have any money sitting around collecting essentially no interest, you might want to consider loaning your business some money. If you don’t need to buy anything, consider paying down some debt and save yourself some interest costs.
If you don’t have any free cash sitting around, you might want to call on friends or family and pay them more interest than they may be getting on money-market accounts, but less that it would cost you at a bank.