Small business owners face unnecessary financial risks unless they’re careful in looking for a loan. This, as the result of high interest rates and onerous fees.
It’s possible to get the lowest-cost small business loan. If you want to apply for a business loan from a bank or credit union, plan to handle the loan the right way.
Whether it’s a business loan, a cash advance against your credit-card income, equipment lease or purchase or commercial mortgage loan, don’t have stars in your eyes.
Be pragmatic. The trick, of course, is to make certain you use the funds to grow your business. You’ll want to achieve your objectives, fine-tune as necessary and keep growing.
Here are six tips to capitalize on the loan:
1. Set up a separate account
You shouldn’t deposit the loan funds in your primary business account. In essence, act as if you don’t have the loan funds.
Don’t over-spend. Use the funds only when needed.
2. Establish automatic loan debits
Not only will you save time, you’ll get better terms. Moreover, you’ll avoid problems. Late or missed loan payments will hurt your credit score and your standing with lender.
Naturally, this means it will be difficult to get loans in the future.
3. Forecast and plan your budget
Many young entrepreneurs are so excited about having a lot more money they often make the mistake of treating a loan like income. It isn’t.
A good financial system is vital for your business. The most difficult part for many entrepreneurs is preparing and understanding financial projections.
Not only will a properly prepared financial statement tell you what’s transpired in your business, it will give you a snapshot regarding your future.
Forecast your income and expenses. Use best practices in preparing financial statements.
Manage your cash flow. Don’t spend any of the extra money just because you have it. Spend slowly as possible.
“The lack of money is the root of all evil.”
Install good operational controls like checks and balances to monitor your cash flow and to spend the money.
Maximize performance with effective budget planning.
Consider opportunities to cut costs.
For instance, inquire about vendor discounts, refinance other loans, use the right strategies for energy management of your facilities or put your utility expenses on an equal monthly-payment plan.
Save wherever you can.
And if you buy and sell products, manage your inventory costs.
4. Continue to monitor your financials
To alleviate uncertainty in planning and monitoring your money, you must have the right information. Don’t overlook one important tool – you must determine your break-even point.
Maintain your focus: Intensely watch your spending, minimize expenses so you can grow your revenue.
Pay as much or more attention to your finances as you do to operate and market your company.
On a regular basis, schedule time to review your cash flow – expenses and revenue – to grow profits. Never deviate.
Yes, you’re a busy person. You might even consider on passing on new business. Give it a lot of thought before walking away from new business.
5. Evaluate your pricing
Implement best practices to give you pricing power.
6. Take steps in case of trouble
If your sales are down and costs are hurting your profits, implement the right solutions.
But if you’re struggling to make your loan and other payments, don’t procrastinate or hide from your obligations.
Be transparent with your lender. Explain your situation and ask for suggestions. Be prepared to negotiate successfully.
With successful negotiations, your lender might offer to help in some way – such as restructuring or refinancing your loan – instead just commencing collections against you.
From the Coach’s Corner, editor’s picks to maximize your money:
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“The lack of money is the root of all evil.”
Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.