Today, businesses express that there is never sufficient cash. As a business owner you need to worry about bills, loan payments, and unexpected expenses. As a result, rises the issue of investing. What happens, when you have additional cash? Do you make additional business loan payments or invest it?
First, financial decisions depend on independent circumstances and goals. Every business is unique. Furthermore, every owner that runs a business is even more unique. With this said, you need to address what are your goals? Only you can set your personal and business goals.
Second, address these issues when they arise. When your business provides you with extra cash, what do you do? Without a doubt, most business owners do one of the following:
- Pay down debt, by making extra loan payments.
- Invest it back into the business.
- Spend it, on things they don’t need.
- Save it.
- Do nothing.
Addressing Additional Payments
We are addressing two choices; loan payments or investing. Let’s address the first one. If you have loan payments, your periodic payments is the priority. Making, your payments on time is important. In fact, if you want to keep a good credit rating, make your loan payments on time. Also, you know that if you make additional payments, your balance will go down. More important, you will reduce the outstanding balance faster. Making additional extra payments, may be a wise choice.
When to Invest?
Second, issue to address is deciding if you will invest versus making additional payments. Without a doubt, this issue can be addressed quickly. The simple question to ask; does your business need an investment at this time? If your business does not require a capital infusion, making additional loan payments is a great strategy. This will reduce your overall debt. At the same time, most businesses always need to invest. The best strategy would be to diversify the extra cash into three different areas:
- Make an additional payment to reduce your debt
- Invest a portion back into your business
- Save another amount
This diversification strategy will allow you to make several financial accomplishments.