This seems intuitive, but many business owners end up taking more than they need as a “cushion.”  Often this cushion supports debt payments short term and isn’t used strategically to improve the business.  When the cushion runs out, lack of planning can lead to payments becoming uncomfortable.  Remember, “need” and “want” are two separate things. 

In line with only taking what you need, determining a comfortable budget upfront is key to strategic planning and success. Responsible business owners start with a budget, and then back into how much they can borrow based on that budget. Remember, you don’t have to reach all of your business goals at once.  Prioritize immediate needs and build up your financing relationship over time.  Negative payment history will impact your ability to obtain more funding in the future, so be sure to start conservatively.

As the saying goes, “when you’re building something, use the right tool for the job.” The same applies to business financing. One of the pitfalls small business owners make is using long term financing for a short-term needs. An example would be using a 5-year loan for something as small as next week’s payroll. This sounds crazy, but business owners fall into this trap far too often.

As a business owner, you want the lowest cost of capital possible. With most financing programs, the faster you pay off your balance, the lower your cost will be. In addition, reducing business debt quickly increases cash flow and defines strong business leadership.

If you experience challenges with your financing, don’t compound the problem by taking on more debt.  Be honest about your situation and communicate with your funding advisor to arrive at a plan to get back on track.  Everyone hits a bump in the road once in a while and that’s okay, but the worst thing you can do for your business is try to borrow your way out of a problem. In almost every case, that only serves to make matters worst and digs a hole that is difficult to climb out of.

Whether it’s funding today, or a renewal tomorrow, our experienced advisors are here to make every step of the funding process simple and easy for you.