Looking to grow your business and hire more staff is always a very exciting yet important point in a business.

Before Applying – Important Questions to Ask Yourself
But, we would advise you to really ask yourself if you currently have the business that would warrant you to comfortably take on debt. In addition, you should seriously be asking yourself if you have a plan to pay off that debt in the near future.

Leverage Can Get You Into Trouble
We cannot tell you how many times clients get ahead of themselves by leveraging up their balance sheet and hiring staff without having the business or future business to support such a model. You can put your business in a very deep hole that can become very tough to climb out of.

Leverage Can Work if the Right Conditions Exist
If you can very comfortably say that you need additional employees to help grow the business, then it may make sense to obtain credit. Just be very confident that you can pay the interest and principal down in the future. As for funding the initial payroll with an overdraft or bank loan, you will likely want to get a bank loan. Overdraft rates are usually higher than bank loan rates.

Working With Your Bank
In working with your bank, be as forthcoming as possible regarding your history and your needs. Your banker, in turn, will tell you exactly the information he or she needs to present your “best case” to the bank’s credit committee. Be sure to provide no more and no less than what is specifically requested. The banker may advise that, in order to obtain a loan you need to increase operating cash flow in the business.

Loan Interest Is Usually Tax Deductible
Please note that loan interest and fees is generally tax deductible if you paid the interest and fees during the tax year (refer to IRS Publication 535).

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