As a small business owner, you’ve likely invested a lot of time, effort, and resources into day-to-day operations, so having some extra capital can help you expand your business. According to professor Alexander Lowry, director of the master’s program in financial analysis at Gordon College, it’s vital to compensate yourself in a way that benefits your business and your personal finances. If you’re unsure how to proceed, follow these top tips to find a financing partner.
First, get to know your credit score. It’s imperative to know your credit score, as it may affect your loan application. You can improve your personal credit score by paying off debt, removing incorrect derogatory items, and opening a business credit card. As long as you’re responsible with the card, you’ll be building up a business credit history while raising your personal score at the same time.
In addition to being responsible, you should also be disciplined in your accounting, as this will help you avoid debt, invest, and grow your business. Accurately tracking your business expenses and income will allow you to gauge your profitability and make sound decisions about where to invest your money. For example, if you’re a director of a company, you’ll probably need to pay off your director’s loan before tax time. This can be difficult, so make sure you have a plan and stick to it.
Another reliable source of business funding is a supportive family. Family members have an vested interest in your business’ success, so they’ll be willing to lend money at a lower rate of interest than banks or financial institutions. They’ll also be willing to negotiate terms like a generous grace period. However, make sure that the relationship is formal, as blending family and financing can end up with bad consequences.
When you’re starting a small business, you need startup funds. There are different ways to finance your business, including crowdfunding campaigns and business credit cards. While each of these methods has their advantages and disadvantages, most options will work for most businesses. However, you should make sure that you understand the pros and cons of each method before you make a decision. So, what are the top tips for financing your business?