One of the biggest issues that small businesses face is cash flow. Waiting 30, 60 or sometimes even 90 days before your customers pay an invoice can cause issues with the amount of cash you have coming in, ultimately impacting the way you run your business.
One of the ways we can solve this cash flow problem with your banking policy is by loaning your company money from your personal banking policy.
Here’s how that works:
You first take a loan from your personal banking policy. Then you personally write a loan note to your company. The reason we take this extra step is to avoid commingling funds. That loan note puts a wall between your personal and your business accounts so when tax time arrives you can have a paper trail of where the money went and why. After your company receives the loan, they begin paying back that loan based on the terms set forth in the loan note, usually principal plus interest.
The best part is…
You are making money and building up your cash flow in two different ways. The first way is that you’re charging yourself a higher interest rate than you’re borrowing from your banking policy. That increase in your interest rate is profit off the top for you. The second way is in most circumstances your company can write off the interest paid back from that loan on your business taxes. Most of the time, interest from loans is a deductible expense for your business. *Double check this with your accountant because everyone’s situation is different. This is not tax advice.
Now you’ve become your own bank and you don’t have to worry about getting capital, a line of credit, or otherwise interacting with a bank to keep your cash flow issues under control. You are the bank now.
To learn more or get started with your own banking system, watch this video: www.TheMoneyMultiplier.com/member-area. Then, give my team and I a call at 386-456-9335 or email us at [email protected] with any questions you may have.