This week we will talk about another way to keep more of the money you make. As a business owner, you may need to buy items on credit, whether you have a business credit line or you have to use personal or business credit cards. This last scenario is often the case for solopreneurs and home-based businesses.
One place to spend your money is the interest on loans you take out. Therefore, it stands to reason that paying less in interest means keeping more of the money you have. Many business owners finance big purchases in their business by using personal credit cards. For those who have good credit, the interest might not be high, which can help with not letting a lot of money go towards interest. most cases though, it proves more cost efficient to take out a loan - preferably for the business - instead of charging the purchase on a credit card.
There are experts who can help you with building business credit, so you don't keep using personal cards. Even before this can happen, it is a good strategy to build a relationship with your banker, so you can take advantage of good advice when you need to purchase a big item on credit. Even though I recommend to my clients to use a couple of banks for their accounts, I believe in using the same branch (or a couple of branches) for most of your banking needs. This will help you build a relationship not only with the teller that attends you most of the times but also with the branch manager. As they get to know you better, make sure to talk to them about your business and its needs.
If you do find yourself charging big purchases on your credit cards, make sure you keep track of your balances and make payments beyond the minimum, so you can pay it off as fast as possible. One way to spend less on interest is by asking the credit card company to lower your interest rate. Some of the companies are willing to negotiate when you make all payments on time and you maintain a good credit history.
It is not a great idea to risk your home by refinancing credit card balances into your mortgage, or as an equity loan. Though this may mean lower interest, it also puts a lot of pressure on you not to lose your house. Your health does not deserve this extra challenge! The tax savings you would get on the mortgage interest may be substantial though, so it is worth checking with your accountant or tax specialist.