Company loan – what can be included in costs? A company loan is a great help in setting up and developing a business, but remember that it also puts a strain on our budget. How to reduce its cost?
Fears of repayment problems constitute a barrier for entrepreneurs thinking about expanding their business. It should be remembered that not all credit, but only its interest part is tax deductible.
Analyzing the interest rate from the beginning
Therefore, with this issue in mind, it is worth looking at the offer and analyzing the interest rate from the beginning. The higher it is, the greater the installment amount we are obliged to pay, which can be a challenge for us.
However, analyzing the previous sentence, the interest may be entered by us in the costs of doing business, which will reduce the amount of tax. By subtracting the amount of fees from the capital already paid, we can realize that the interest rate does not have to be the lowest for the loan to be profitable for us.
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Accurate analysis before choosing an offer and a broader perspective directly translates into financial management in the company. Keeping this in mind, you should choose the most favorable financing method, because as you can see, lower interest rates do not always mean a better offer. In many cases, we have to add commissions and other bank charges. The good news is that we can also deduct it from the tax, as well as credit insurance provided it is not life insurance for the borrower.
However, in the case of a commission for the purchase of a fixed asset, it is deductible only after the fixed asset has been commissioned. Up to this point, the commission increases the value of the asset, which increases the amount of depreciation charges. Let’s calculate all this before making a decision to choose the best for our company.