Starting a small business can be both exciting and nerve-wracking. You are finally on the road to fulfilling your dream, but you can feel like your safety net is gone. The first few years of running a small business can be full of financial ups and downs. Before making the leap from full-time employee to full-time entrepreneur, you may want to make sure that your financial house is in order and that you have something to fall back on when you hit lean times.
- Clean Up Your Credit
One of the challenging elements of starting a small business is that you might not be able to get a loan in your first year. If you are able to put the money you are making back into your business instead of spending it on your own expenses, it can help you keep the company afloat during any lean times in the early days. In the meantime, you may be able to take out a personal loan to help make ends meet. However, in order to do this, you need to have decent credit.
You should start by getting a copy of your credit report from all three agencies. Check these over and make sure the information on them is correct. You can also take steps to dispute any information that is incorrect. If your credit score is not what you’d like it to be, you might want to consider waiting a year or so to start your business so you can improve it. One of the easiest ways to do this is by getting a credit card, using it regularly and paying it off each month.
- Build Up Your Savings
Of course, it’s better to have money in the first place than to take out a loan, so as you are preparing to start your business, you should build up your savings. If you can get a six- or twelve-month cushion, this will give you a lot more flexibility in making decisions that are best for your business in the long run even if they mean less cash flow over the short run. Even if you are already saving, there may be ways to put away more. For example, if you are paying student loans, you can probably get a lower interest rate by refinancing from this site here. You can then put the difference into your savings account.
- Plan Ahead for Cash Flow Problems
Planning ahead means that if you do run into cash flow problems, you won’t be scrambling for a solution during a stressful time. For example, you may want to research your options for invoice financing. Waiting on other companies or clients to pay the money they owe you is often a source of cash flow issues, and with invoice financing, you may be able to get a loan against those debts. You should also look into requirements for various other types of business loans. Even if your company is not eligible for them right away, after you have been up and running for a year or so, that could change.
