Houlihan Smith Advisors Give Advice on How to Keep a Small Business Afloat
When business gets slow, new small business owners can get desperate in order to keep their businesses afloat until things start picking up again. Every money source possible, such as credit cards and home equity lines of credit are used to hold a business together, but if the business owner were to talk to a Houlihan Smith consultant, he or she would see that these money lines, while helpful to keep a business afloat for a while, are only short term fixes that may be more effort than they’re worth.
For example, many business owners try to use their credit cards like a line of credit and try to pay off their business expenses until revenue starts floating in. This is popular because credit cards offer the ability to make purchases or obtain cash advances and pay them at a later time.
However, if the business owner were to chat with a Houlihan Smith consultant, they will learn that credit cards can be a very expensive source of funding. Although most credit cards have reasonably low interest rates for purchases, their cash advance rates can be as high as 17% to 19% due to greater delinquency rates and will charge business owners 2% to 4% of the face value of a cash advance as a “fee.” A Houlihan Smith advisor will explain this in detail, as well as try to find an alternative to the credit card.
Another method of credit business owners should talk to their Houlihan Smith advisor about is the option of tapping into their home equity to finance their ongoing business operations. A Houlihan Smith advisor will go over how home equity loans and lines of credit have many advantages, such as low interest rates and the possibility of having some portion of it deducted from taxes, as well as explain that the major disadvantage is that it directly places the business owner’s home at risk.