Hello and welcome to the “holy cow, I can do that?” review
How many of you right now have your personal house or other assets guaranteed against business loans that you’d like to de-leverage?
One of you is enough…many is why I am writing this.
Business risk reduction rarely occurs at the front end of a business cycle, rather it can and does occur while the business is maturing or matured. Ideally maturing because the trend lines support the growth hence, less risk…in theory anyway. As much as I am inspired to talk more about risk and maturity, that’s not the focus or why you stayed to read this article further.
Here is the skinny from the lenders point of view…debt financing ensuring profit and risk aversion. A financing company’s objective is to earn income from the interest rate they collect from their financing provided. Interest rates on your financing run parallel with the risk factor. Ideally, no risk and earning interest is optimum but that is fantasy land but the next best thing to a financing company is nominal risk while earning interest income. If your company has continuously grown its sales and profits for a lengthy period of time and the profit can comfortably sustain the debt loan on the company, you want to remove those security agreements as soon as possible. Why? Why not? Bottom line, by doing what most businesses don’t do enough of and plan for the future you can optimize your lending limits down the road by having lien free assets and show the level of security your company provides to any potential investors or more importantly, new clients and business partners by running your business without general security agreements (GSA) against your assets. This shows strong management.
If your accountant has tried to convince you of this but you’ve been too busy to worry about it, they were providing good advice. Let a trusted financing advisor ensure your business has optimum debt financing and the right amount of collateralized assets. We’ve been performing debt financing for over 30 years so you can be assured of our advice and professional business financing services.