Deciding How You Should Fund Your Small Business

102 44
There are many ways for businesses owners to get financial assistance when starting a new business. The options range from a credit card to small business loansor even business factoring. Each choice carries with it a variety of positive and negative features. In todays economic climate, it becomes even more important for small business owners to weigh all options before starting their business venture.

Credit Card
The reason many companies would use a credit card for their financing choice is because of the convenience it offers. When customers pay on time and you can expect a certain amount of revenue each month it becomes easy to simply pay off the balance at the end of the month. As long as balances arent carried from month to month to accrue high interest rates this remains a good choice for some companies, particularly smaller companies with reliable clients. Unfortunately, many clients find that they simply dont pay off their balances each month, much like many individuals, and thus the high finance charges pile up and negatively impact a businesses credit score. Dont let this happen to you!

Small Business Loan
This is a smart choice for those businesses that are growing or are larger in size and need money to cover payroll and maybe higher bills. This is also the type of financing option that might be considered if you are starting to have some delinquent customers that might make your credit card balances delinquent and thus acquiring high interest. While you would still want to make sure you have a big enough customer base that could pay each month so that the loan could be paid off in a reasonable amount of time, it is still a good choice for those companies who may need to borrow more. This can be a difficult loan to get without the appropriate collateral. Banks can increase or decrease the terms of the loan based on the businesses performance as well.

Factoring
The current economy has forced some customers to become delinquent in their bills. Cash flow at companies is down due to this problem. Factoring can help a company bridge that cash gap that delinquent customers provide. This is a more complicated financial method but can be very advantageous for companies. It is a great choice for those companies that need a flexible option during times when cash flow is fluctuating but growth doesnt want to be lost. Again, if there are customers that simply wont pay their bills the pricing on this can get pricey. However, factors can take responsibility and manage collections and other administrative chores which can be helpful.

There isnt just one perfect way to financially manage a company. Each company is unique in the way it should be regulated and managed. Especially when starting out a small business, it will be essential to set up a financial plan that is going to work for both short term and long term goals. You should plan for future growth while also taking into consideration the day to day operations and expenses. It can be a very tricky business managing a company financially; however, with all these options available a fit can be found. I suppose that is why we find ourselves personally looking to investors and financial gurus to help us manage our money. These resources can be great for businesses as well. With the proper financial insight companies can withstand this economic storm we find ourselves swirling within.
Subscribe to our newsletter
Sign up here to get the latest news, updates and special offers delivered directly to your inbox.
You can unsubscribe at any time

Leave A Reply

Your email address will not be published.