How to use debt to your advantage

It’s an old adage that you need money to make money. In other words, you need money to invest in order to grow your wealth.

Author - Tom Whitworth
January 20, 2020
How to use debt to your advantage
Author - Tom Whitworth
January 20, 2020

It’s an old adage that you need money to make money. In other words, you need money to invest in order to grow your wealth. Unless you inherit a fortune at a young age, this inevitably necessitates borrowing money at some stage to buy a home or start a business. Debt shouldn’t be a dirtyword, and the vital deciding factor is your skills at debt management.

Maxing out  credit cards on holidays, dining out and high fashion, for instance, accumulates bad debt.  Bad debt as you have not spent the borrowed money on  growth assets and it has to be paid back at high interest rates. A home loan, on the other hand, is good debt. You are paying off a growth asset while saving putting dead money into renting a home.

When you own and run a business you need to be smart about debt. Debt allows you to start your business and to build it at crucial times. You need to aim for and maintain ‘efficient debt’, debt that allows you to acquire assets that have the potential to grow in value and generate assessable income.

You also need to maintain a steady cashflow so you can service your debts. If your customers are late paying their invoices owing to you, then problems can arise paying your invoices from suppliers, loan repayments, wages and other expenses and a cashflow crisis can occur.

Using debtor finance is a solution. Debtor finance can be used to fund slow-paying invoices, which in turn improves your business cashflow and provides the funds to pay your business expenses. By syncing Finstro with your cloud accounting software you will automatically have access to this form of  finance .

Debtor finance works like a revolving line of credit, financing batches of invoices as available funds and adjusting regularly as customers pay their invoices and your business raises new invoices.

With Finstro’s available credit system, you will benefit from improved cashflow, providing the financial stability vital to all businesses.

You will be better able to extend payment terms to clients and customers without the worry of potential cashflow problems. Think of Finstro as your cashflow insurance policy.

What’s more, at Finstro we have your back in other ways as well. Finstro’s holistic cashflow management and debtor management platform has a suite of valuable resources to help manage your cashflow.  These include the ability to run credit checks on new customers to make sure they have the ability to pay you, customised payment reminders to save you chasing late invoices, automated invoice payments to make sure you always pay on time and protect your credit rating and real time analysis of your cashflow position at any time.

If you think Finstro could be the safety net your business needs to ensure your debt management is fully under control, then give it a test run by signing up for a free 30-day trial today.

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