Have you opened a business and found it tough to rent office space because every landlord asks to see your business insurance? If you operate a business that customers visit in person, you’ll need to make purchasing a commercial insurance package a top priority. Those landlords ask to see your business insurance because they’re concerned about addressing commercial liability risk. Their insurance policy covers liability in public areas of the building, such as the lobby but your commercial insurance covers liability in the office space your rent.
Completing Your Insurance Application
When you complete your business insurance application, your insurance agent helps you with the general liability classifications section. Most new business owners don’t know which industry classification applies to their firm. In addition, the insurance agent will likely recommend adding insurance to protect assets, such as business equipment and inventory. They may also suggest adding other types of coverage, including commercial auto, umbrella, and business interruption coverage.
Other Important Business Financial Concerns
With your commercial insurance policy in hand, it’s time to address other business finance concerns. These include your business’s five-year plan, budget, and start up funding. You may have already completed these steps but if you haven’t, do so before signing your lease. It’s important to know how much money you have to start and a realistic estimate of what you can earn each month.
Most business owners have a lot in common even when they own businesses in completely different industries. Finance for business owners is one area of common ground that almost every business owner spends some time worrying about.
Having access to the money you need, managing the finance for business owners efficiently that you do have, and ensuring that you have the cash flow to stay afloat keeps a lot of business owners up at night. Learning more about finance for business owners can help you to have the information that you need to make informed decisions.
Finance For Business Owners, The Basics
If you are a new business owner, welcome to the club. There are over 30 million small business owners in the United States. You have taken the plunge of becoming your own boss, but you likely have a million and one questions, with finance for business owners near the top of the list. There is some basic information that every business owner should know.
There are three important basics about financing every business owner should consider:
- How will I get the financing to start my business?
- How will I pay back the financing I get to start my business?
- How will I keep my business making money?
Business finance is not only about the here and now, it is about the future. A five-year financial plan can help you stay focused on your financial goals for your business.
Most small business owners will at some point be considering a business loan. That is the cornerstone of finance for business owners. There are quite a few loan options that can help you to launch your business. Many of the options stem from the SBA (Small Business Administration).
Getting that first loan can be a challenge, but traditional small business loans are not the only finance options. There are other less traditional resources that you may want to check out. Some of the options that are considered non-traditional financing sources for your small business include:
- Crowd funding. Crowdfunding works by raising funding from a large number of people that invest a relatively small amount of money. You can find crowdfunding sites all over the web. It can be an easy way to raise the capital that you need.
- Grants. While grants are far and few in between, it can never hurt to submit an application. The worst that can happen is that you are denied. Of course, the best that can happen is that you are handed free money. Try it.
- Receivables financing. You can take a loan against your unpaid invoices. Merchant financing and account receivable financing works similarly. Merchant financing provides you with a lump sum of cash against your future sales. Every time someone uses their credit or debit card, a percentage of the sale goes to the lender. With account receivable financing you are selling the invoices that are owed to you at a percentage loss. For example, you have $10,000 in unpaid invoices, you need the capital now, the accounts receivable financing company will pay you $8000 for your unpaid invoices, and they deal with collecting the payments.
For most small business owners finding the finance for business owners that they need to get their business up and running, and keep it running, comes from a combination of lending resources. The point is, you have to keep an open mind and consider outside the box ideas.
Before you make any financing decisions, be sure you evaluate the true cost of the financing and the amount of risk involved. Having an attorney that can provide legal consultation for your business is always a good idea. It is important that you have someone in your corner that can evaluate any contracts that you are going to sign, and provide advice.
A good business lawyer can be your best advocate. In the early stages of your business development, they can be there to guide you through financing choices, down the road, they can act as your employee benefits lawyer, and help you to navigate your human resources needs.
Having the right experts on your team can make a world of difference. Of course, knowledgeable counsel is not limited to only having the right lawyers. At the early stages of your business startup, you should also have a marketing expert on your team.
One of the basics of finance for business owners is ensuring that you are able to continue to generate income. Marketing experts help you to reach your audience and build revenue.
Learn To Recognize the Real Costs
Being blinded by financing offers is not a new phenomenon but it is one that has been the downfall of many business owners. Before you make decisions about financing offers, you want to do your due diligence and read that fine print.
Not understanding what the consequences can be of missed payments does not exclude you from experiencing the consequences. You must always move with your eyes wide open into every single financing situation.
Unfortunately, not everyone you do business with will be upstanding. Often, there are clauses in finance options that outline heavy penalties for missed payments. Be sure that you know exactly what you are getting into and that you understand the risks that are associated with the options you are considering.
Remember that permanent solutions to temporary problems often do not pan out as planned. For example, there is a slow down in business because it is your offseason, but you still have bills to pay. You decide that you are going to take a merchant loan which fixes the problem in the right now, but keep in mind that you will have to pay that money back, and you may have to share your income for a long time ahead.
Sometimes it is just better to tighten the belt through the harder times so that when the better times down the road arrive you can enjoy a robust season without having to worry about losing part of your income to loans.
Owning your own business is not easy. It can be a roller coaster ride of sorts with plenty of ups and downs, but if you stay the course, and find the balance without panicking and jumping on the first financing offer that comes along, you will be okay.
Understanding risks well, and not jumping the gun out of fear, will ensure that you can balance your options and make informed decisions for your business. It can be hard not to be emotionally invested in your business, but you must try not to be. Look at your business from a rational perspective.
Finance For Business Owners When Things Go Wrong
There is no doubt that owning your own business comes with a great deal of risk. One of the most important things you can keep in mind always when it comes to owning your own business is how important it is to keep your personal assets and your business assets separate.
A lot of new business owners feel like “being all in” means co-mingling their finances. Using personal credit cards to startup or carry your business for a little while is not terrible but risking your home can be.
Unfortunately, bankruptcy lawyers see this problem all the time. Let’s say you decide to put a second mortgage on your home to get your business up and running. Things start out okay. Your restaurant is booming for the first year, and you can easily make the additional payments on your home, but then something no one could plan for happens, like a pandemic.
Your restaurant is shut down. Your income comes to an abrupt end. The next thing you know you are trying to figure out how to prevent foreclosure on your home and your family is asking you if it was all worth it.
If your business fails, and you have kept your assets and your business assets separate, you make the job a lot easier for your bankruptcy attorney and get to keep all your personal assets. A lot of new business owners think that to be all in and believe fully in their business that they should be risking their personal wealth. The fact is, it is not true, and can backfire in the worst way.
You can fully believe in your business and move with caution when it comes to separating your finances and finance for business owners. Keeping things separate will:
- Make tax filing and planning easier. You must keep your finances separate for tax purposes.
- Make planning easier. Keeping things separate will give you a more accurate picture of both your business finances and your finances, and will allow you to plan accordingly.
- Protect your assets. It is important that if something happens to your business you can go on. Keeping things separate will protect your personal wealth.
It is not just failure that you have to protect your assets from. An injured worker with a savvy workers compensation lawyer can also go after your personal assets if you co-mingle them. Keeping money separate from the start will reduce the need to stress and worry over your personal wealth.
Make keeping your finances separate a priority. It will make life easier, and ensure you and your family are protected just in case.
Finance for Business Owners Hoping for the Best, but Always Planning for the Worst
To keep your finances safe, you have to have a pragmatic attitude and stick with reality. Of course, you want to keep that positive thought train going, but you also want to have plan B in place at all times.
Connecting with a trusted business financial expert is something every business owner should be considering when they first start turning a profit. As a matter of fact, getting help with business finance planning before you start making a profit can be a worthy investment.
A financial planner that specializes in finance for business owners can help you to grow your business safely in all economic climates. They can help you to set up a financial safety net for lean times. They can help you with tax planning to take advantage of tax breaks.
You mustn’t keep all your proverbial eggs in one basket when it comes to your business. Of course, there will be lean times, but if you plan for those times it will not undo all the progress you have made.
It is far more beneficial to be optimistic about your business because you have planned well, then it is to be optimistic because you hope things go as planned. Ensuring success takes a lot of planning including planning finance for business owners for now and the future.
When Do You Walk Away?
Let’s say you followed all the advice, you did all the hard work. You planned, you kept your finances and business finances separate. You hired the business lawyer, you even had a financial planner, but this is the third quarter of the year and you are not even breaking even, and this is the third year in a row that you have not even broken even.
What do you do? Do you just give up or do you keep funneling money into your business with the hopes that this next finance for business owners is going to perk things up? When things are falling apart, it can be hard to walk away, but sometimes walking away is the best option.
One of the biggest mistakes small business owners make is thinking that finance for business owners is something you should have to keep pumping into your business. The emotional attachment to your business can be your undoing. In some cases, it is better to walk away intact and start over again.
Knowing when to give up is not a character flaw. Learn from your mistakes and apply those lessons the next time around. Business is a risk, but it can be a risk that is worth taking. You have to be able to calculate when the risks have outweighed the odds of success.
Injecting more cash is not always the right answer. Too shore up the odds of success, one of the best things any business owner can do is to learn all the in’s and out’s of finance for business owners. The more you know the better the odds of your success.
