Making a successful startup is hard work, but it’s so rewarding when it finally kicks off. Now comes the true challenge: making sure your business is financially secure. As you’re already aware, running a business costs money, and a lot of it at that. The amount of money you must fork out is absurdly high and can make your first few months very difficult. This is why it’s critical that you work on building up your business’ financial security. Financial security is the amount of money you can safely depend on. In this article, we’ll be covering how to quickly build financial security for your startup.
One of the most common mistakes that many startup owners make is combining their personal finances with their business funds. At first glance, this may seem like it’s convenient as you have everything you make in one account, so it’s easy to keep track of. However, this isn’t as convenient as it sounds. In fact, it can be incredibly detrimental to your business. In fact, did you know it’s considered to be a risk to combine the two? If something goes wrong, your personal assets could be ultimately impacted. The best way to separate these funds is to open a business account. Business accounts house your company’s funds, but there are a few factors that make them different from the standard bank account. These accounts give owners legal protection and can make tax time easier to manage.
How would cosigning a student loan help you build financial security? Cosigning someone’s student loans as a business, whether it’s your child, a sibling, a friend, or an intern working for you, is something that requires serious thought prior to saying yes. While a cosigner can boost your credit score, it also means taking on additional financial responsibility that needs to be factored into your business plan. Once the student graduates and starts paying off the loan, it’ll reflect positively on your credit report as well.
Debt is something all company owners fear; it can pile up faster than you can pay it off. While you’re most likely going to need the outside help, you cannot let debt overwhelm you. Credit cards and small business loans should only be used when you absolutely need them. Any profits you make must be used to pay back what you owe. Making payments on time and even paying more than what’s required can help you build trust among your lenders. The more they trust you, the more money you can get when you need to take out another loan.
Professionals, like accountants and financial advisors, and down the line those that offer marketing tips and hiring strategies are critical to a business’ success. Their counsel can help you effectively strategize investments, create a better budget, and make better financial decisions. Keep in mind, however, hiring these people will cost you money, so you need to figure out how much money you’re willing to spend.