Most new business ventures don’t make money for at least the first year. As an owner of a new business, or a small business, it should come as no surprise that finances can be very tight while you’re working to get your business off the ground. So, how do you avoid compounding your tight finances with high interest loans? Today, I will discuss some ideas to assist you in preparing for the time when extra finding is needed.
It’s important to make conservative estimates when it comes to your future profits. While you always want to give the impression to potential investors that you will be profitable very quickly, it’s more important to be realistic and err on the side of caution with your estimates. No matter how you are getting the funding for start-up, it’s important that you make sure your funding covers all of your costs with some left over. Use your business plan as a tool and cut costs whenever possible. The more you can cut initial costs and operating costs the more funds you will have on hand if the unexpected comes along.
A business line of credit or a company credit card is another method of avoiding the use of a business cash advance. By having a business line of credit you can fall back on during emergency situations, you will avoid the need to scramble looking for funding when you have problems such as equipment failure.
Once your business is profitable, I would also recommend the use of a savings account. Regular deposits into the account will allow you to have your own source of immediate funding without interest rates and monthly payments that would come with using either a business cash advance or a business line of credit.
This principle also applies to future business plans and expansions. Make sure to have a healthy margin before you expand, while it’s is important to grow your company and capture new opportunities, you don’t want to risk the stability of your current operations. By utilizing these methods, you are planning for the unexpected and preparing your business for success.