A business loan is very useful in getting your new company up and running when you don’t have the cash to invest right away. Loans allow you to invest more in equipment, inventory, outside help and office space from the beginning when you aren’t making much, if any, profits. But what happens when your business takes off and you start turning a profit? One of the best financial moves you can make is to pay off your business loan early. While you’ll initially be putting more of your profits toward the loan, you’ll pay less in interest and be debt free much sooner.
Let’s pretend you took out a business loan for $20,000 over five years. If the interest rate is 9.5% you’re monthly payment is $420. Assume that you pay this for the first full year while starting and growing your business. After twelve months, you’ve found that your business has really taken off and you are able to make a double payment every month, thus paying $840. This simple action will help you to pay off the loan more than two years earlier and save nearly $2000! If you rounded the payment up to $1000 you’d cut off three more months and $400 in interest.
What if things are going well, but not that well? Even an extra $50 a month will cut off several months and nearly $500. That’s money that could be reinvested into your business, add to your product line or just give yourself a bonus for all of your hard work.
When deciding to pay off your business loan early, make extra payments manually so that, if you have a bad month financially, your business doesn’t suffer. Keep your regular payment automated and initiate extra payments after you make sure you have the cash on hand to cover the withdrawal.
If you are just getting started with your new business and are in need of a loan, we’d be glad to help you find a lender that meets your needs. Visit us at UnsecuredBizLoan.com to fill out a free, no-obligation application today. Once approved, you’ll be ready to invest more into your business and make it a success!
To apply for funding for your small business, use the form on the right to begin the application process.