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As a small business owner, sometimes you’re so busy you don’t have time to focus on your finances. However, this can be a huge error and the consequences can be catastrophic. So, what are the key mistakes to avoid?
Source: http://cashsolv.co.uk/
Talking of late payers, you shouldn’t let them get away with it. Chasing invoices might not seem like your number one priority. But allowing payments to become overdue increases the likelihood that you won’t get paid at all. Make sure you start chasing as soon as invoices hit the due date.
If you don’t have a clearly costed business plan, you may not know how much cash you will need – and when to stay in business. Forecast your cash flow carefully and make sure you address any shortfalls before they occur.
Even if you’ve realised you need to borrow, you may not realise how much. Ask for too little and you won’t solve the original problem. Request too much and you increase your risk of being turned down. Unless it’s a flexible product allowing early repayment, you could find yourself paying interest on money you don’t really need.
In some cases (particularly if you’re a start-up with zero collateral), lenders may only be prepared to advance you money as an individual. Be extremely careful: once you start mixing your business and personal finances, you can quickly find yourself personally liable for any debts. In other words, if the company fails you could find yourself homeless as well as jobless.
Source: Cashsolv
A business line of credit which acts like an overdraft allows you to borrow and repay at will. It can prove a lifesaver if a piece of office equipment fails, a sudden investment opportunity arises, or a client simply pays late. Don’t forget to arrange one, even if you don’t need the money now.
Finding the right loan is only part of the issue. First you need to find the right lender. Your bank will understand your financial position better than anyone, but this is not the place to go if you require fast finance or a tailored solution that’s out of the ordinary. Make sure you talk to alternative lenders too, as they have quite difference acceptance criteria and offer a more innovative range of products.
Before you sign any loan agreement, read the small print carefully as there may be some hidden charges that can really mount up. In particular, watch out for early repayment penalties otherwise there could be a sting in the tail if business suddenly improves and you have spare cash on hand.
Lenders love collateral, as secured loans reduce their risk (effectively transferring it to the borrower). But whilst secured loans may be cheaper and easier to obtain, they’re not the only game in town. Don’t worry too much if you don’t have any assets that you can use.
