Joe’s Decision
Joe asked for a consultation about his SBA loan and the rising interest rate. He was very concerned about it and wanted to formulate a plan to pay it off. But he also wanted to buy some equipment, and couldn’t do both. As we discussed his options, something became very clear to me. The interest expense on the SBA loan was minuscule compared to the increase in revenue and net income he would have if he purchased the equipment.
It wasn’t just that the equipment would help so much, but that the client had contacts in his industry too. Putting those relationships with the equipment purchase would land this client onto an entirely new playing field.
In addition, the equipment purchases would save the client tens of thousands of dollars in tax over the next two years.
In the end, the client decided to purchase two very large, expensive pieces of equipment that would improve several things:
Immediate positive cash flow with the tax savings
The ability to bid on much larger product procurement projects
The ability to sell to much larger loads to much larger customers
A 100%+ increase in sales volume
Substantially increased Gross Profit Margins
Highly improved net income
Increased business value including increased demand for the business when he decides to sell
And the ability to pay the SBA loan off more quickly with his increased income
A winning scenario if there ever was one! Needless to say, this client will be sticking around with our Fractional CFO Services.