Focus on your ROI when assessing your small business credit needs


Lately, when we hear about interest rates in the news, it’s usually about the pace at which they’re rising, how the Federal Reserve is using rate hikes to fight inflation, and how those factors make everything more expensive.

For small business owners, it’s always important to have a long-term view, but it’s even more critical during times like the ones we’re experiencing right now. While higher rates can make it more expensive to get a loan for your small business, that doesn’t mean you should wait to get the funds you need in the hope of lower rates.

If your business needs financing, there are several ways to acquire it that will give you a good return on investment (ROI). Building on a challenging interest rate environment can actually provide opportunities to strengthen your business finances.

Here are some options for reinvesting in your small business and increasing your return on investment.

Consider the impact of inflation

With inflation putting businesses and consumers in a more difficult financial situation, a short-term cash injection can help your small business keep its cash flow, inventory at the levels needed to thrive, and your buying and selling power manageable. .

Inflation doesn’t seem to be going away anytime soon, so take a close look at your near-term expenses and expected income to identify any ebbs or gaps that could impact your business.

Acquire real estate

Owning real estate for your business can be a great driver of return on investment, not only because of the equity your business builds, but also the revenue it can generate.

Small businesses that own their “home” and occupy at least 51% of the space can use the additional space to rent it out to other tenants, both commercial and residential, depending on the zoning of the property, to establish consistent sources of income that can be reinvested. get back into the business and increase cash flow.

Owning your business home can also provide tax benefits such as the deduction of annual interest paid on the loan and other expenses associated with owning the property.

Identify what makes sense for your business

The financial needs of small businesses are not all the same, nor are the financing options. What works well for one company may not work as well for another.

Small business owners should consult with their lender and accounting partners to determine their cash flow and financing needs, and whether a loan is right for them, regardless of the rate environment, to maximize their return on investment.

In addition to buying real estate, some popular options small businesses should consider include:

• Lines of credit for small businesses — Lines of credit are ideal for providing cash flow if your business experiences seasonal changes in working capital, needs a short-term cash injection to cover rising inventory costs, or has opportunities fast-moving business you want to take advantage of.

Small Business Administration Loans (SBA) — SBA 7(a) loans are a popular option due to their low cash outlay, long repayment terms, and government-guaranteed backing. This allows for flexible credit requirements for borrowers who have difficulty obtaining traditional bank financing. SBA 7(a) loans can be up to $5 million and offer repayment terms of 10 to 25 years at modest rates.

• Equipment finance loans — A great option if your small business needs or sells equipment, these loans can help finance transactions and even provide tax benefits.

Whichever direction is best for your small business in today’s environment, keep in mind that your current investments can position you well for future success.

Anthony Ryan is senior vice president, director of retail lending strategy and operations for WSFS Bank. He previously served as senior vice president, director of small business lending. Ryan joined WSFS in 2011, bringing with him over 30 years of retail and small business banking experience.


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