As the year draws to a close, you have a million other things to do other than worry about taxes. But taking the right funding approach now can reduce your taxable income, maximize your deductions, and prepare your business for growth.
Take a moment to consider and implement these five financial strategies before December 31st to kick-start the new year for your small business.
1. Upgrade Your Equipment
The IRS allows businesses to deduct the full purchase price of qualifying equipment or software under Section 179—up to $2.5 million for 2025.1 If you purchase or finance equipment and begin using it before the end of the year, you can claim the entire cost as a deduction for this tax season. That makes December the ideal time to upgrade your vehicles, tools, technology, and machinery to maximize tax savings.
To preserve your cash reserves while taking advantage of Section 179, consider using a small business equipment loan to finance your purchases. You can finance a new point of sale (POS) system for your retail store or a diagnostic machine for your medical practice, spreading the cost over the life of the loan. And as long as you put the new tools to use before December 31st, you reap the tax benefits immediately. It’s a win-win for both your finances and your efficiency.
2. Prepay Operating Expenses
If you expect high profits this year, consider prepaying certain business costs, such as rent, software subscriptions, insurance, maintenance contracts, or marketing, for the next 12 months. You’ll be able to lower your taxable income by paying these deductible expenses before the end of the year.
When you use business loans for small businesses to execute this tax strategy, you also set yourself up for smoother cash flow when January arrives. This approach is especially valuable for industries that experience seasonal slowdowns after the holidays.
Imagine using a revenue-based business loan to prepay supplier contracts and software renewals for your landscaping company before the slower winter months. This loan type allows you to repay based on a percentage of your sales. With lower monthly expenses and financing that adjusts to your income, you remain financially stable during your leanest seasons.
Using working capital loans with adaptive structures to prepay operating expenses reduces your tax burden now and keeps your business ready to grow in the new year.
3. Refinance High-Interest Debt
Debt restructuring affects your tax strategy because business loan interest is generally tax-deductible. If you lock in a new financing agreement in December that clearly breaks down the borrowing costs, you can write off the total amount of interest you’ll pay on this year’s taxes.
If you’re refinancing, you can often consolidate their current obligations into a business term loan with lower interest or more predictable payments. You could also consider a sale-leaseback agreement for an expensive piece of equipment or a revenue-based financing plan with flexible payment terms. Talk with small business funding companies to explore debt restructuring options that fit your business model.
If your cash flow is tight, but your profitability is strong, consider refinancing your debt as a gift to your business this holiday season. Saving taxes in December will roll over into the new year, giving you stronger financial control in January.
4. Manage Cash Flow Gaps
For many small businesses, transitioning from one year to the next often means delayed payments, slow receivables, increased expenses, and emergency financing. Unpredictable finances can make your taxes chaotic, too. Smoothing your cash flow maintains steady operations and stabilizes your taxable expenses.
Let’s say your restaurant typically experiences a rollercoaster of highs and lows in its expenses, depending on the time of year. By using a business line of credit to maintain steady operational costs through the year, you can more easily track and deduct qualifying expenditures come tax season. You’re less likely to miss write-offs and can better predict your payment to the government.
Managing cash flow gaps with tax-deductible financing also improves your end-of-the-year accounting. You can deduct interest costs from your taxes. However, you’ll need to arrange for funding that utilizes interest rates, such as credit lines or working capital loans, rather than emergency capital sources with fee structures, like a merchant cash advance (MCA) or credit card.
Securing financing now to manage your cash flow gaps means you can head into the next year and tax season with minimal financial stress.
5. Reinvest in Growth
To reduce the higher tax obligations that come with a strong year of sales, reinvest your profits into your business before December ends. The key is choosing deductible expenses that will help maintain your momentum.
Consider investing in your team at the end of a successful year. End-of-year bonuses, employee discounts, parking or transit passes, and even gym memberships can all count as deductible expenses.1 Funding job-skills training or providing education reimbursements can also give you another tax write-off while enhancing your business’s potential.
Stocking up on inventory is another way to improve your taxable income. Depending on your accounting method, you’ll either be able to deduct the purchases in the year you make them or in the year you sell the products.2 And you can often avoid price hikes and negotiate supplier discounts in Q4 to save you money in Q1.
You can also use business loans for expansion, turning your growth initiatives into tax-saving opportunities. Opening new locations, purchasing assets, launching marketing campaigns, and hiring additional team members often qualify for deductions under IRS guidelines.
Reinvestment is the ultimate one-two punch. You reduce this year’s taxes and set the stage for an even more successful year.
Work with a Financial Advisor
Before finalizing any year-end moves, consult your tax professional. They can help you navigate complex codes, calculate your potential deductions, and ensure your strategy aligns with your long-term goals.
Also consider working with an expert who understands small business lending. A loan advisor can help you identify the ideal mix of short-term financing and long-term funding to maximize your tax benefits while minimizing costs.
The best financing strategy aligns your overall tax plan and financial needs to support long-term business goals.
Jumpstart the New Year
End-of-year financing is a way to create and carry momentum. It’s like charging the battery and refilling the gas tank on your business’s engine. By planning expenses and using financing strategically to reduce your tax burden and preserve cash flow, you prime your business to jump into the new year.
So talk with your tax professional to finalize your plan, and contact a small business funding company to secure the funds you need. Then watch tax season become a launchpad for your business’s growth.
1https://www.irs.gov/pub/irs-drop/rp-25-32.pdf
2https://www.law.cornell.edu/uscode/text/26/471
