When is it smart to finance?

Finance

Sep 26

Ask any successful business person and they will always highlight the value of protecting cash-flow within a business.  In saying that, staying up to date on technology, machinery and everything that makes your business tick is vital too.

So where is the balance and when do you finance?

This is different for every business, but unless you have one of those beautiful businesses with many numbers in the bank balance, there is a rule of thumb I have identified whilst working with many top performers across many different industries:

Put your cash into APPRECIATING items and finance DEPRECIATING items.

Appreciating Items

By ‘appreciating items’, I mean things that MAKE you and your business money.  Staff, stock, shares, new business acquisition, these are things that cannot be financed, and things that you (hopefully) see a significant return from – IE you invest $100k into a staff member who makes you $200k in return.

Depreciating Items

Technology, I.T., machinery and cars….whereas it can be argued that these items allow you to make money, the actual capital investment will not.

Ask yourself this, if you put $100k into an investment, and in two years it was worth $65k, and in four years it was only worth $50k.  Would you be happy?  If that was your Share Portfolio performance, would you be happy?  Well why then would you consider putting $100k cash into a car, or a machine?  My advice would be to put in place a fully tax effective finance facility to fund this sort of purchase, and use your cash to make more money!!

If you’re not too sure where this tipping point is, and what sort of asset you can afford, firstly you need to know how much you can apportion for monthly repayments.  Matias Group can certainly help you in a simple phone call to identify how much your monthly repayments equate to for an overall buy-price.

You work so very hard for your money…Protect it by being smart!

LM

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