Should You Finance And Expand Your Business Or Pay Off Debt?
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Call Nicholas Kilpatrick
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It takes a lot of discipline, discernment and courage to swim against the conventional wisdom of our previous generations to pay off debt as quickly as possible. By that I mean that when given the choice whether to use money to expand your business footprint or pay off debt, the best decision may be to go with expansion and float the debt. Pay off personal, non-wealth debt first though. However, here are a few reasons the best decision may be to go with expansion and float investment, or good- debt:
- Low rates:
If the cost of financing investment debt is really low, and when you consider points 2 and 3, it is best time to channel resources to increase your business. It doesn't take a huge amount of money to finance debt at low rates and the return on investment by attacking business growth, given that estimated rates of return warrant such a decision, may be greater than what financial institution are offering to park your money. Remember, you need to work smart, not hard - this is not your job, it's your business.
- Time
It's true that you really only have only so much time to build your business. If you’re going to implement a business growth strategy by acquisition, you need to start aright away, because you can't buy time. The worst thing would be to look back and be overcome with remorse because you didn't take advantage of time that you were given to expand your business footprint.
- Ability
You have the ability now to expand, but who knows what will happen to your health in the future. Combine time, health, strategy, and execution and you can build/acquire multiple business units to provide a good nest egg in coming years.
Nicholas Kilpatrick is a partner at the accounting firm of Burgess Kilpatrick in Vancouver, B.C. He concentrates his practice on business development - assisting business owners with accounting services, tax and estate planning and overall business development.
