When you’re running a business it’s imperative to keep on top of your finances. Not just for the obvious reasons like your outgoing expenses of wages and business costs, but so that if and when needed, you’re able to apply for a business loan. Why would I need to do that, I hear you ask? There are many reasons why you might want to apply for a business loan, but the main reason would be to help grow your ever-evolving business. A well-thought-out cash injection might just be what your business needs to take it to the next level. So, if this is something you can see in the future of your business, let’s take a look at how you can improve your business finance options.
Keep an eye on your credit report
Your credit report is the beginning of any kind of borrowing you can foresee for your business, so it’s important to get on top of it. Lenders use your private credit history to help them decide if you’re a trustworthy borrower, so it pays to understand what they’re going to find on your credit report. You can view your credit report for free on ClearScore, and it even gives you tips on how you can improve it. However, the baseline for a healthy credit score is to keep on top of payments, and if you do have loans that you’re behind on, get in touch with your creditor to set up a payment plan.
If lenders can see you’re making repayments and improving your credit score, you’re more likely to be approved for loans in the future. If there is an error in your report, you can contact the loan reporting agency and request a correction. This can ease the impact of these black marks against you and your business. Always be honest about your credit history and you’ll find it easier to get out of the black.
Keep expenses to a minimum
Whether your business is comprised of a large team or you’re running things alone, you will have expenses that dip into your earnings. Keeping expenses to a minimum will help your cash flow grow larger each month. A great way to do this is to plan a year in advance for larger expenses such as rent, payroll, taxes, interest, and costs for materials and goods you sell. It’s also a good idea to shop around for materials and goods every now and then to make sure you’re getting the best price. This will help ensure your cash flow stays strong even in tighter months of the year
Rent instead of buying
If you can see yourself wanting a business loan at some point in the future, now is the time to start preparing. As mentioned earlier, lenders need to see that you can be trusted with their money and that most importantly, they’re going to get it back. Think about whether you’d lend yourself money if you were in the position to, and if the answer is no, you need to make some changes. This could be the choice of renting your business premises instead of buying it, and not just because buying could be a large cost that your business can’t afford right now. Renting and keeping up with rent payments will reflect well on your credit report, which we know is the most important thing when wanting a loan.
Hire an accounting team
Not everyone is built for handling money, and if it’s not really your forte, it might be time to hire an accounting team to do all of the hard work for you. They can ensure you’re on top of your wages and taxes, which also reflect badly on your business if you need a loan. Not only that, it gives you a chance to tend to more pressing matters in your business.
Define the line between business and personal
One of the biggest mistakes business owners make is amalgamating their personal and business earnings. This can make it hard to define which money is personal and which money is profit, meaning that profits may end up being spent where they shouldn’t be. Open a commercial bank account for your business so that you can differentiate what money is meant to go where. Not only that but having a separate account for your business helps when it comes to taxes.
Buy insurance
Nobody wants to buy insurance, but a sad fact of life is that you may end up needing it. To ensure you have a viable portfolio and manage your business finances, you need to spend some time investigating what’s right for your company and its needs. Insurance gives you the needed protection if legal cases are even brought against you.
Don’t overcomplicate things
Finances can become complicated when you’re sending and receiving money from other countries, and if this is the case for your business, now is the time to streamline this process. For example, if you have clients in Switzerland, you could encourage them to pay you through a new platform called swiss money, which allows them to send, spend, manage, and invest money with ease – without making it complicated on your end too. You should also use handy systems like Cloudpay to avoid hidden costs and give the company a credit card so that it can have financial backing for the tougher months.
Outsource where needed
Finally, outsourcing is something you should be considering to help with your business finances. Not only does outsourcing allow you to temporarily hire someone to do a job for you, but it also businesses can reduce overhead costs associated with hiring and training employees, as well as avoid the costs of investing in expensive technology and software.
Planning ahead with the intent of borrowing for your business might not be something you’ve thought much about, but if you take these steps you will find it much easier to be approved in the future. Not only that, but even if you don’t end up borrowing, these tips will help your business grow financially anyway!
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