Investment Planning

As a business owner, you are constantly faced with questions: How do I pay my bills? How do I fund an acquisition? Should I pay cash or should I take out a loan?

Short-term borrowing is necessary to cover short-term funding needs (i.e., funding this week’s payroll as collections have not yet been received). Business loans, on the other hand, are a financing agreement with a lender (usually a bank) where a lump sum of cash is received to finance strategic initiatives.

Another way to fund growth is through equity, such as through capital calls or acquiring a new equity partner. In a capital call, each owner contributes a portion of their personal funds, normally calculated based on their percentage of ownership. With a new equity partner, the partner will contribute cash and expertise in exchange for an ownership portion of the company.

It is important to be strategic about how you manage taxes and interest (or borrowing costs). There will be certain time frames when you will want to generate the highest profit, while at other times, you will want to minimize profit. These scenarios often are attached to current laws.

Interest is the cost of borrowing money. I will discuss with you the potential impacts that borrowing money can have on your company’s growth trajectory. Managing your taxes and interest costs is as equally important as generating revenue and paying your expenses.