Did you know that nearly two-thirds of businesses fail to make it past ten years?
One of the biggest reasons that businesses fail is due to financing mistakes.
If you’re concerned about making business financing errors, then we’re here to help.
Read on as we look at five common business financing mistakes that you need to avoid.
1. Ignoring Hidden Fees
Business loans often include fees that many businesses fail to take into account.
Some lenders will charge as much as 4% of the value of the loan as an arrangement fee for setting up the loan. If you don’t take this into account, you will find yourself with a serious shortfall.
You should always consider fees when comparing business loans.
2. Inadequate Cash Reserves
It’s wise to put some money away for unforeseen circumstances in your personal life. The same applies to business too.
If you don’t have adequate cash reserves when the unexpected happens you may not have the money at hand to be able to deal with it. By the time you’ve applied for an emergency loan, it may already be too late.
Even when things are tight, you should always be working to build up your cash reserves.
3. Disorganized Accounts
It’s vitally important to keep your accounts in order. If you don’t, you may miss something vitally important and leave your business in dire straits.
The good news is that there are plenty of tools available to help you keep your accounts up-to-date and well-organized. There are apps and example of invoice template that will help you do everything from producing invoices to tracking expenses. You can even create pay stubs too.
The better organized your accounts, the easier it is to maintain control of your finances.
4. Misunderstanding Interest Rates
Interest rates can be confusing. Nominal rates, APRs, effective APRs, it’s all too easy to get confused.
The trouble is if you’re not clear about exactly what interest rates you’re paying then it’s impossible to organize your finances correctly. Get things wrong and you may end up owing far more than you expected in interest.
If in doubt it’s always best to seek professional help rather than try to muddle through on your own.
5. Poor Tax Planning
Your finances are looking really healthy and everything is going swimmingly. Then you get your tax bill.
If you haven’t planned in advance for taking care of any taxes you owe, then you’re going to struggle when it comes time to pay. It’s vital that you’re aware of all the taxes you need to pay and put money aside to cover them.
Otherwise, you could end up spending money you don’t really have.
Don’t Make These Business Financing Mistakes
Just because other people have made these common business financing mistakes doesn’t mean you need to. In fact, now that you know about them, there’s really no excuse for making them at all.
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