Four Credit Tips to Avoid SME Failure
Right off the bat, we’ve to admit that, here at Coach Sonja Shear, we are excited about the upcoming Get Smart About Credit Day. As you might already know, this is the day when financial stakeholders across the globe look to disseminate knowledge on the indispensable fiscal benefits of practicing good credit. And, there’s no question credit is the backbone of today’s small and medium enterprises (SMEs).
In the spirit of the day, we’ve rounded up 4 credit tips that’ll see your business breeze through its formative years - and possibly beyond.
Read on.
Great (Small) Businesses Start Off Small
As you might expect, raising enough cash to start a business, however small, has not always been a walk in the park. That’s the inherent reason most SMEs resort to credit. And for good reason. If handled rightly, credit can tide your business over during its infancy. The thing, however, is that a small business calls for a small loan. If you go overboard, things can become a little hectic, if not downright disparaging. For one, if things don't pan out as you’d hoped your personal savings or a teensy bit of asset can cover your credit obligation.
Never Mix Business with Personal
The age-old advice that “don’t mix business with pleasure” still hold to this date. True, your company can reap from your personal input, but letting business and personal finances bleed into each is a big No-No. It’s paramount that your small business garner its savings account (for small accruements), checking account, and, of course, credit account.
Keep Your Credit at No More Than 35% of Your Running Capital
Having more capital at your business disposal is great, but running half of your SME using someone else’s money is another story. Good credit practices call for nothing more a third of capital in loan facilities. Anything more than that is certainly a sure kiss-of-death for your small business.
Do a Little Research
When it comes to credit, a little ingenuity goes a long way in preventing “oops” moments. For starters, you need to know how credit or loans impact the bottom line of your business. How does the interest rate pit against your business revenue? Here, having a business coach on your side can come handy. Don’t be a “blindfolded” entrepreneur who doesn’t mind the big picture; sometimes a credit facility might not be doing justice to your business at all.
For more information about Business Consulting, or for an obligation-free initial consultation, please contact Coach Sonja today.
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