3 Tips for Startups to Achieve Financial Success
Earth Class Mail Team
August 29, 2018
Guest post by Courteney Reed, Financial Industry Analyst at Credit Card Insider
Successfully growing a business is no small feat. It takes a great team, determination, and often a decent helping of luck. With so many things to contemplate, it is often hard to find a place to start seriously investing in your startup’s growth. Here are three suggestions:
Separate your business and personal finances
As a business owner, you need to apply for an employer identification number (EIN) via the IRS website. This allows your business to build a credit profile and maintain a record of business transactions. Until you file your business as a separate legal entity, you could be held personally liable for all financial activities.
The sooner you establish your credit profile the sooner your business begins to build credit. Opening a business credit card and using it responsibly can help you track your expenses and profits, build your credit scores, and simplify tax filings. Conversely, mixing business and personal expenses on a personal credit card can quickly eat up your credit limit, causing a drop in credit scores and making it harder to apply for personal credit, such as car loans or mortgages.
Consider these advantages of using a business credit card:
Separation of business and personal expenses
Higher credit limits than personal cards
Rewards like cash back, miles, points, and warranties
Potential to increase business credit scores for better business loan terms and high-tier business credit card rewards
Better cash flow management, allowing 20-30 days to pay business costs without interest
Finance To Fit Your Needs
Successful businesses often use outside funding to plan ahead for their business needs. Here are three tried and true options worth considering:
Small Business Loans
Small business loans provide access to capital before revenue streams begin flowing. Plus, by successfully managing a business loan, you’re increasing the potential of securing bigger business financing when it’s time to expand your company. Finding the right business loan may take time but you’ll have working capital you need to get off the ground.
Venture Capital Funding
Financing investors provide funding to startup companies that are believed to have long-term growth potential. This type of funding usually comes from wealthy investors, investment banks, and other investment companies, and ownership of a business is divided between the investors and the proprietors of the business. There are different platforms that provide a database of different investors looking to invest in new companies or promising business ideas, making it easier to find investors interested in your market niche.
Alternative business funding is capital offered to small business owners by “non-bank” providers. Alternative lenders are particularly attractive to small business owners who don’t have an established business credit profile.
Most lenders have their applications available online, making the approval a quick process. Their interest rates are typically higher, but if you need money in a timely manner, alternative lending might be the way to go. Typically lenders extend loan repayments from 6 months to a year, but depending on the type of loan you choose, you may not have to pay the money back until you actually draw from the provided funds.
Leverage Software to Increase Efficiency and Reduce Costs
After getting approved for more financing, you’ll need to stay on top of all the financial details. The right software can help streamline multiple tasks and increase your team’s performance and overall efficiency. Here are three tools for keeping your finances in order:
Payroll management is often a burdensome task, especially as your business grows in manpower. Effortless HR is an HR tool that enables employees to self-manage their payroll preferences, time off, and access any other necessary information without the assistance of an HR employee.
Quickbooks for Finances
Quickbooks is simple to use and helps you keep track of all basic business transactions. Plus, they regularly roll out updates to their online platform for flexible financial management.
A cloud storage solution is a must-have for organizing and sharing important files. Depending on your specific needs, Dropbox contains tools that benefit secure record keeping and flexible collaboration.
The path to growing a successful business is not a concrete one. However, these three tips can begin to increase your financial literacy and day to day expense management in a simpler and more productive way. Seriously considering these recommendations will give your business a better chance of success and expansion in the future.
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