Saturday Jan 28, 2023

Got a Tax Refund? Here Are the Smartest Things You Can Do With Extra Cash. – Entrepreneur


Opinions expressed by Entrepreneur contributors are their own.

The average tax refund this year is more than $3,200. For a small business owner dancing on the entrepreneurial tight rope, juggling a pandemic, broken supply chains, and inflation, reinvesting that money into your business could be a much-needed lifeline

Catherine McQueen | Getty Images

State of the economy aside, there’s one thing you can bet on when it comes to entrepreneurship: finding the money to run a business is hard work. The number one challenge small business owners face is accessing capital, a problem only exacerbated by bias, lack of credit history, and other obstacles typically reserved for woman- and minority-owned businesses. At Hello Alice, the company I co-founded five years ago, our data highlights the limitations that come with not having access to working capital, including attracting and retaining top-tier talent, slower revenue growth, and difficulties with inventory management. It’s why we’ve prioritized connecting small business owners to funding opportunities, like grants and fair lending – our data also shows that just $5,000 can make a difference in keeping a business alive.

Even for a healthy business, reinvesting your tax refund offers a chance to pay down credit cards, acquire assets, or pursue new opportunities. Our most recent data indicates that 84% of small business owners want to expand their business this year.

If you’re looking to grow your small business with a tax refund, here are a few great places to start.

Related: 5 Tips for Finding the Tax Advisor Who Will Save You Millions

1. Pay down your debt

Running a small business is a delicate balancing act. Trust me, I’ve been on the losing side of that balance with my first failed business nearly fifteen years ago. If you’re among the 38% of entrepreneurs with outstanding debt, you’re likely no stranger to juggling credit cards, business loans, or the money lent to you by friends or family, all of which help tide over unforeseen disruptions in cash flow, open the door to new opportunities, and allow you to grow.

There are numerous methods for paying your debt down responsibly, but here are a few things to consider:

  • Pay down high-interest debt first — don’t let it spiral out of control and put your credit score and business at risk
  • Have multiple credit cards? Assess your APRs and balances and start by paying off the one costing you the most
  • Consider using a credit card payoff app like Tally to manage and consolidate all your cards in one place and pay off your debt, potentially at a lower interest rate

Related: Business Investing for Business Growth

2. Advertise, advertise, advertise

DIYing your way through advertising makes sense when you’re bootstrapping. Instagram and TikTok accounts are free. You get to have full creative control of your content, be your authentic self (and brand), engage with your market, test your messaging and more — all without spending a dime. But the algorithms! The ever-changing technology. The competition. It’s another full-time job! Little wonder our recent data indicates that 15% percent of women entrepreneurs and 11% of their male counterparts list brand awareness as their number one challenge.

With a refund in hand, there are a number of ways to boost your reach:

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