Banker’s acceptances - are they REALLY good for your business?

Bankers acceptances are a very low cost type of loan that you can get to cover a shipment of goods or inventory that you will then sell once it arrives. Then, in theory, you will use the cash you generate first to pay it back, keeping the rest to pay expenses and hopefully some in your pocket as profit too. But are these loans really good for your business?

Well, there is no doubt that they can help you out when things get tough but if you are needing to get a banker’s acceptance every single year, and barely getting by even then, you might want to re-think your business plan.

You see, a loan like this is perfect for starting up, or for getting a lot of inventory after a rough patch of the year when you had some unforeseen obstacles. It is also great for when you have a money, but just need a line of credit with a bank that you have never done business with. But if you rely on bankers acceptences to just get you by every single year, you might be setting yourself up for a catastrophic financial disaster.  Yes, small business desperately need capital, but if you need a loan every single year to get by, then the chances of you going under increase every single cycle. Why?

Well, you obviously are not clearing enough to pay for a lot of inventory out of what you made last year… that right there should be a red flag to you. Now, if your business is brand new, then of course you will need a loan. But if this has been going on for years and years, and is in contradiction to how it was planned out on your business plan, you might want to think about cutting loose and running from it this year. Better to go to work for someone else than to be sitting on a lot of inventory that you cannot sell.
 

Comment on "Banker’s acceptances - are they REALLY good for your business?"