Top 8 Mistakes Businesses Make When Financing

Most small businesses will never need financing, so starting a conversation about financing when you do need it is incredibly difficult. The best time to start talking about your financing needs is before you have them. It’s hard to know when you will need capital—you might not even know what your business idea is yet—but setting up relationships with lenders can take months or years, depending on where you are in your business development.  Don’t worry if it takes longer than expected; just get started. Mike Nickerson from Palo Alto Software thinks that thinking of finance as an ongoing process can help alleviate some of these mistakes. Business owners should consider their finances at least once a year and more often if they see something unusual (like large account receivables or customer orders in excess of budget), he says. Nickerson recommends checking revenue against expenses every three months: An entrepreneur should always be asking themselves questions like ‘How much m...

One of our biggest jobs as business owners is to make sure we always have enough cash on hand. Do you know how much money your business makes and spends each month? If not, it might be time to get familiar with your company’s cash flow. A healthy cash flow means you’ll be able to pay expenses when they come due and avoid incurring debt or bouncing checks. It also helps you avoid many other common financing mistakes. The best way to start getting a handle on your cash flow is by tracking income and expenses for at least two months, preferably four months. There are plenty of resources available—even online tools (hint: Google free small business accounting software)—to help you calculate your cash flow . Just remember that there are many different ways to track revenue and expenses; it’s important to use consistent methodologies across time periods so you can see how much money you make or lose on average each month or quarter.

Financing is the lifeblood of any business. But it can be a frustrating and tricky process, especially if you’re not well-versed in finance or don’t have access to the right people to help you out. It’s one of the biggest decisions in the life of your business – should you finance or seek external funding?  To help you make an informed decision, we asked experts what they think. This article will share 8 mistakes businesses make when financing themselves and how they can avoid them. Let’s see what they had to say!