Reduce Long Term Debt Interest Charges

Small business should pay extra money toward the principle balance of large loans or lines of credit.

When your business becomes extremely profitable and you find that you have extra money in the bank, start paying extra towards large debt that is incurring interest each month. This will lessen the terms of the loan and, over time, can save you thousands of dollars in interest charges. Apply extra funds to the principle balance. The interest you pay is calculated based on the total amount of your principle, so paying down this amount will lower the total interest paid over the course of the loan. This can also result in lessening the terms of the loan by months or even years depending on the total of the extra payments.

You can use an amortization calculator to see the effect of making extra payments.