Posted by u/debt_or_index
Pay off business debt or invest the cash?
Answered by Ask a Shop Owner ·
$80k SBA at 9.5%. Also have $80k sitting. Pay off or invest in market?
u/askashopowner Owner-operator advisor
Top answer
At 9.5 percent, pay it off. Guaranteed 9.5 percent return, tax-free (you no longer owe interest). Nothing in the market beats that risk-adjusted.
One caveat: keep 3 months of operating cash after the payoff. Do not go to zero. Better to pay off $50k and keep $30k in reserve than pay off $80k and be tight.
Rule of thumb: at business debt rates over 8 percent, pay off. Under 5 percent, keep and invest. In between, it is a mix based on your cash comfort.
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