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Are credit cards, personal loans and other debts cutting into your profits?

Debt

If you’re using debt products like this for your business, your best bet is to pay them down as quickly as possible, and then close the accounts when they are paid off.

An effective technique in both a personal and business setting is to list all of your debts, find the one with the highest interest rate, and pay more than the minimum payment until the debt is gone.

From there, keep working through your list of debts until all of your high-rate loans and credit cards are paid off.

Closing small accounts after they are paid off will help your credit history and score; with that said, keeping a small balance on one or two high-limit, low-interest lines of credit will show that you are a responsible user of your debt purchasing power.

You may also consider refinancing some of your debt with a secured business loan; interest rates on business loans are often much more affordable than personal debt, and will consolidate all of your small payments into one easy-to-remember monthly obligation.

It may be required that you guarantee all or part of your business loan with collateral items, such as equipment or vehicles. While that may be an intimidating prospect, the security this provides to the lender will further improve the rates and terms you may be able to secure for business financing.

For most entrepreneurs, some form of debt is essentially unavoidable in the current economy; if you’re smart about the credit products you use, taking on debt in your business isn’t always a bad thing.

Evaluating the APR of credit products, paying down high-rate credit lines and refinancing your debt with business loans are all effective ways of minimizing your costs of debt and eventually maximizing your future profit.

Clint Reecer

Clint Reecer

Clint is a native New Mexican who is passionate about assisting the small business community throughout the state. He has a B.B.A. in Finance and an M.B.A. in Management of Technology, both from the Anderson School of Management at the University of New Mexico. Clint specializes in using technology to improve small businesses, and in 2012 was awarded a “Titans of IT” designation by New Mexico Business Weekly for his ongoing work with local companies. He also has a great deal of experience managing the finances of small business, and his consulting approach emphasizes sound financial management as a core business practice.