AmiSight 4/21: The Financing Mistake That’s Costing More Than Interest Rates

Ami Kassar
2 days ago
2 min read

I spoke with a business owner this week who needs about $150,000 to buy out a minority partner. She also wants a larger working capital facility to grow the business. Both are legitimate needs. But she was thinking about them as one problem to solve at once.

The working capital ask is possible, but it is tricky. Her business can support it, but it's the kind of deal that takes time, the right lender, and the right moment to get done well.

My recommendation? Don't wait. Get a smaller SBA loan now. Clean up the partner buyout, get some extra working capital in the process, and then have the time and breathing room to pursue the bigger, more complex financing on your own terms.

Her concern? The SBA loan carries a slightly higher interest rate than what she might eventually get on the larger facility.

Here's the honest math: on $150,000, the rate difference we're talking about amounts to a few thousand dollars a year, at most. Meanwhile, the partner situation is unresolved, the business is constrained, and the clock is ticking on a deal that could sour.

That's being penny wise and pound foolish.

The best financing isn't always the cheapest financing. Sometimes it's the financing that solves the real problem in front of you, while you set yourself up to solve the next one properly.

Don't let the perfect deal be the enemy of the good one.