Interest rates on loans are really low at the moment, but they can still be a major expense for many schools and non profits. Here are a couple of tips that we have used in helping save clients literally hundreds of thousands dollars in interest over the life of their loans:
Use surplus cash to park against the loan and then re-draw it when you need it. Especially relevant to schools who receive 50% of their annual funding from the Commonwealth government in January. We had one client save $70K a year in interest just by doing this.
Look at the type of loan you use – P&I v Bank Bills – you may see a difference
Look at your finance structure – depending what you are doing, loans, finance leases or operating leases (or a combination of these) may be best
Understand the components of your interest cost – base rate, line fee rates, risk margins, etc can all have an impact
If you had some financial issues in your organisation’s past, have a look at your risk margin – sometimes banks “forget” to reduce these once you are going well again.
With rates low, think about your interest rate risk management strategy
How long since you reviewed your loan structure, or even your overall banking arrangements?
If you would like Resolve to have a look at your loan portfolio or your banking arrangements please contact us to see if there are savings to be made.