Running a small business is not for the faint of heart.
Small business owners need to be aware of how their personal habits and decisions can affect the success of their venture.
While certain companies, such as Merchant Growth, can help with quick small business financing solutions, being aware of the connection between your finances and small business can mean the difference between success and failure. We’re taking a closer look at how person habits can impact your business.
Issues Bad Spending Habits Can Cause For Your Small Business
Here are some of the more detrimental consequences of having poor personal spending habits:
Difficulty Obtaining Loans or Credit
High levels of personal debt can severely damage small business owners’ credit scores and leave them unable to access loans or other forms of credit. They can also be perceived as high-risk borrowers, which can limit the funding available to them. So finding funding in a traditional financial institution with much more rigid criteria for small business loans becomes less likely.
Cash Flow Issues
Small businesses need to be prepared for unexpected events that occur, such as employee resignations, equipment failures, and natural disasters. Without proper preparation, sudden financial difficulties can significantly set your small business back and even cause it to go into unmanageable debt levels. While certain business factors may affect cash flow, like inventory purchases, delays in receivables, or pay only upon project completion, poor personal spending habits exacerbate the impact of these unforeseen expenses and put your company at risk of going under.
Limited Growth Potential
When small business owners do not manage their money carefully, it can limit their capacity to invest in areas that will help the business grow. Mismanaging funds might be the difference between being able to seize an opportunity that pushes the business forward and being left behind as what is required for success in your industry evolves.
Loss of Focus and Reduced Productivity
Unstable spending can place you in financial distress that can affect your mental and physical health. Businesses reflect those who own and manage them, and if poor money habits are causing you undue stress, it will show in the performance of your business. Unlike your personal spending habits, which only affect you and your family, as a small business owner, you are also responsible for your employee’s financial well-being when it comes to salaries being paid in full and on time.
Good Financial Habits You Can Work on Building
Although poor spending habits can seriously affect your business, the silver lining is that these habits can be changed. Here are some positive financial habits you can build to put your small business in a position to succeed:
Creating a Budget
Budgeting offers small business owners the ability to plan and track, helping to ensure that all bills are paid on time (a habit that will help boost your credit score). Creating a budget also allows you to identify any unnecessary expenditures, so you can make the necessary changes and save more money with cost-effective alternatives.
Building an Emergency Fund
Having a dedicated emergency fund can help you handle whatever financial issues may arise and help you avoid turning to costly loans and lines of credit to cover unforeseen expenses, allowing you to turn to these financing options when you are ready.
Keeping Business and Personal Finances Separate
Separate finances will help you stay organized, but it also makes it easier to track expenditures and monitor your small business expenses and will help you get in the habit of investing profits back into the business.
Seeking Professional Advice
Consult with a professional financial advisor or accountant to ensure that you have reliable guidance and support to make informed decisions about your finances. You will be able to develop robust financial strategies that are tailored to your business goals and financial objectives. You will be better equipped to make decisions regarding the following:
- Taxes
- Budgeting
- Expense tracking and management
- Cash flow projections
- Investments
- Retirement planning
Ultimately, consulting with a professional financial advisor or accountant can make all of the difference in setting your small business on the path to success.
Merchant Growth Can Help Fund Your Small Business
Whether you need funding because your small business has come through tough times or because your small business is thriving and needs to grow, Merchant Growth offers small business financing options. From fixed financing or e-commerce financing with minimum eligibility requirements, it’s easy to secure financing and get your small business moving in the right direction. Get started today!
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