It’s an investment that can really pay off.
- It’s a good idea to invest small business income that you don’t need to use right away.
- There is an investment worth looking at that offers a generous return right now.
- Consider purchasing I bonds with your small business income.
If you own a small business, you may need every last dollar you get to sit in your checking account so you can cover expenses like inventory, payroll, rent, and utilities. But if you’re in a position where you don’t need every dollar to cover immediate expenses, then it’s worth considering investing some of your business income, in the same way that it often makes sense for individuals to invest money they don’t have. use. immediately.
Now there are various assets you can invest in as a small business owner. But while investing, you may want to limit your risk. After all, you never know when business might slow down, so you don’t necessarily want to risk losing a lot of money on an investment portfolio.
For the most part, however, there is no such thing as a risk-free investment. If you buy shares, their value may fall. And the same thing can happen if you invest money in bonds issued by different companies.
But there is another type of bond available to invest where you are I won’t you have to worry about losing money at its face value. And this specific type of bond happens to be paying a lot of interest right now, making it a potentially wise choice for your business.
It’s worth looking at the bonds
Over the past year, many individual investors have bought I bonds to take advantage of the high interest rates they have been paying. If you’re not familiar with I-bonds, they are government bonds whose interest rate is tied to the rate of inflation. Because they are issued by the government, you are not at risk of losing money. If you buy $5,000 of I bonds, you won’t have to worry about them being worth less than $5,000 in the future (whereas if you buy $5,000 in stocks, that position might only be $3,000 down the line).
Since inflation is so high now, the I bonds pay 6.89% interest until April 2023. That’s a really generous return.
Now one thing you may already know about I bonds is that you are limited to purchasing $10,000 worth of these bonds each calendar year. If you’ve already maxed out $10,000 in I bonds this year in your name, that doesn’t mean you’re done. If you own a small business, you can buy I bonds on behalf of your company, which counts as a separate transaction and limit (in the same way that your spouse, for example, can go out and buy $10,000 bonds this year, even if you already bought $10,000).
Are bonds right for your small business?
One drawback of I bonds is that you are required to hold them for at least one year. And if you pay them off before five years have passed, you’ll lose some interest on the penalties. You may be reluctant to tie up your business cash for a long period of time, which is understandable. And if that’s the case, you might want to choose a different investment.
But if your business already has some cash on hand and you’re doing well right now from a cash flow perspective, then it might make sense to put some money into I-bonds as a long-term investment. Although I-bonds aren’t paying as much interest as they were earlier this year, a 6.89% return is certainly impressive, especially when the risk factor (or lack thereof) is taken into account.
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