Borrowing Money to Improve the Growth of Your Business

Many financial advisers have attached a stigma to going in debt. While carrying revolving consumer debt such as credit cards is generally a bad idea, borrowing money can be used in a constructive way to grow your business.

Finance theory states that a person should take all positive net present value transactions. This simply means that a business should undertake an investment that has a return greater than its cost of capital. With interest rates being so low at the moment, this means there is a very low threshold for someone to benefit from borrowing money as long as they can expect a decent return. Instead of putting off that expansion that will generate a 15% return on investment until the cash flows can pay for it, take a loan at 7%. The math does not lie.

Borrow Money

Borrowing money is usually best accomplished at a local bank through a program such as an SBA loan. There are a variety of different programs backed by the federal government that make relatively inexpensive loans available for businesses.

However, not all businesses can be accommodated by traditional lenders. If the business needs a capital expansion right away, the red tape of the traditional process can get in the way of getting a transaction done in a timely manner. For these situations there are a variety of bridging loan lenders that can help out a business. These lenders generally can step in with less paperwork and fill the gap between the rapid need of capital and the eventual formal approval of a bank loan. While the interest rates they charge tend to be at a premium, as long as they are substantially below your cost of capital they represent a great opportunity for expansion.

Borrowing money from your business is a great way to expand. Large corporations with big budgets make a habit of it; so should your business.

Some tips front the public about borrowing money.

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