Business finance is one of those subjects that can keep you tossing and turning with anxiety in the middle of the night. As your 3 am self knows all too well, ignorance definitely isn’t bliss when it comes to your cash flow. With this in mind, we’ve covered the five most common questions that business owners lose sleep over.
1. What does cash flow actually mean?
It sounds basic, however, too many business owners make the potentially fatal blunder of mistaking profit for cash flow – even if only subconsciously. If you’re guilty of this, then you need to learn from the many enterprises that fall apart each year, despite stellar “on paper” profits. Frequently, the reason behind their failure lies blindness to their cash flow trends.
No matter what industry you’re in, there will be strong months and lean months. Over time, you will be able to identify predictable trends and tweak your practices to ensure optimal cash flow, all year round.
2. Should I have a business credit card?
As a business owner in the modern world, you can get by without a credit card. However, you’ll be robbing yourself of many benefits. Most business credit cards offer a minimum of 30 to 90 days in which to pay off the balance interest-free (some even longer). This allows you to take better control of your cash flow while providing access to the items you need, regardless of whether you’re in a high or low earning month.
Most business credit cards also come with an array of valuable perks, including cash-back incentives, insurance, points you can put towards travel or useful products, and more. The key is to do plenty of research before selecting a card to ensure you’re getting benefits that match your needs.
3. Where can I get financing that won’t become a crippling debt?
Business financing options are everywhere, and you don’t have to stick to the bank with which you usually do business. Some options to consider apart from traditional lenders include:
- Private lenders
- Credit cards
- Government grants
- Family and friends
- No-interest loan schemes from not-for-profit lenders
You’ll need to weigh up the amount of capital you need, the amount of work you’re willing to put into applications, and your willingness to approach certain people. Stepping away from the traditional lending route can be tricky, so once again, it’s vital that you go in well-researched and prepared.
4. Do I have the collateral needed to secure business finance?
The kind of collateral you’ll need for business finance will differ depending on the lender you go with. However, the most common options on the table include:
- Personal or business property
- Machinery and equipment
- Outstanding invoices
- Inventory
- Valuable collectibles
- Your investment accounts
5. Should I accept funding from friends or family members?
Securing funds from friends and family can be a quick way to secure the finance you need to grow your business. However, it can also backfire spectacularly, resulting in irreparable rifts in your social circle.
With this in mind, it’s essential that you take people’s personalities and risk profiles into account before accepting assistance from them. You also need to set clear terms to ensure both parties understand what’s reasonable and what’s not. Put this in writing, have both parties sign, and you’re less likely to run into misunderstandings down the road.
With these questions answered, you should have five fewer things to stress about in the middle of the night. Of course, there’s really no end to the things a business owner has to worry about, so it’s worth dedicating some time every day to researching your areas of concern.
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