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How to manage corporate debt

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Managing personal debt is very different from managing corporate debt. However, there is one thing they both have in common, interest payment. If your company has a lot of debt, you most likely are paying a lot of money in interest. Of course, corporate debt can be a good investment as well. Some established companies have borrowed money to expand operations and grow their business. Interest payments can also decrease a company's taxable income, because they are deductible.

Companies have two options when they need money, they can issue more stock or take on debt. Having little debt on your corporate balance sheets is the best option. If you are already in corporate debt and you are looking for ways to properly manage it, here are a couple options for you to look at.

Leasing is a great way to run your business with less debt. Leasing is borrowing the equipment and machinery you need to get your business started without having the required money to start it in the beginning.

Equipment leasing is a great way to run your business with less debt. Equipment leases allow you access to many types of equipment i.e.; computers, copiers, fax machines, cars, fixtures, and office furniture without having the allotted cash up front or using business credit cards. Even though leasing doesn't bring in cash, it does reduce the amount of cash you have to raise. For the short term, leasing is an excellent solution to gaining what you need now. In the long run, leasing does cost more than buying, but if you need to run your business now, this is a great alternative.

Along with obtaining the equipment you need leasing allows for your company to save on ongoing costs such as maintenance repairs and upgrades.

Many companies also use factoring. Factoring is usually aimed at a new business or a running a business with less debt. If you are starting a new business, factoring is a great way to keep cash flow steady to keep your business afloat. Factoring is the process of selling your accounts receivable invoices to a third party who then is in charge of collecting on the invoice. The agents in charge of collecting are called factors. Factoring for small business is a great way to provide financial growth. Since cash flow is so essential in business, factoring is the best method to expand operations.

Factoring allows a company to sell invoices at a discount and be paid a cash advance before the invoice comes due. Since many businesses monthly sales do not produce cash on time, factoring is a great method to pay wages and creditors.

One of the great things about factoring is that it does not tie up assets outside the business and does not involve repayment of debt at some future point in time.
Many companies also use business credit cards to finance certain aspects of the company. Just like a personal credit card, a business credit card should be compared to several other types of cards to select the best one for your company. A business credit card can offer some great benefits:

  • Higher credit limits. Most business credit cards carry limits of $50,000 or more. This is great for businesses that need to make large purchases.
  • Credit rating boost. Your business credit score can boots by having a business credit card, not misusing it, and making timely payments.
  • Separate business credit. A business credit card stands on its own, meaning your personal credit rating is not reflected in your transactions.
  • Control on employee spending. A business credit card makes it easier to set limits on spending by employees.
  • Business perks. The rewards offered on business credit cards are typically business related and may include discounts on business travel and on shopping at business supply outlets.
Whatever option you decide to use, always know your cash flow situation. Don't spend more money than you make!
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