For small businesses that are experiencing a steady increase in customers, web traffic and leads, everything may appear to be going well. From what emerges from a quick internet search, a company may look like its thriving. It has a glossy and professional looking website and a product or service that seems to fills a need. Yet, with 60% of businesses having a presence on the internet, according to a leading marketing company, the competition to the top – in terms of both success and the search engine results – is fiercer than ever. Companies that appear to be doing well are actually barely making it financially.
For small businesses that are experiencing positive results thanks to intense marketing efforts, they may still be struggling financially thanks to the tough competition. This may be true especially when they are just starting out or when they are going through an expansion or growth phase. After investing in their website, product development, technology and the like these companies are often at a point where they lack the internal resources to finance their own continued growth. In these cases, they need to turn to outside capital in order to get the capital they need continue the business operations.
While some businesses are able to get approved for a small business loan, others do not have adequate credit history and as such, may banks will not work with them. In those cases, some small businesses will turn to a merchant cash advance, which has higher rates and fees than a small business loan, but is not contingent on the business having established credit or collateral. Still other businesses may look to other alternative sources of financing.
In the best of cases, these struggling small business are able to use the financing they receive and fly ahead towards success, easily repaying the loan or cash advance on time. In dire situations, however, some small businesses get caught in a circle of debt out of which that can’t break free, and are forced to declare bankruptcy.
Here are three easy steps that take practically no effort that a business can take from the getgo to help ensure that it ends up in the success category and not in the bankrupt category.
Keep personal and business credit separate
Keep business and personal finances as well as business and personal credit separate from each other, so one does not negatively affect the other in case something goes wrong. Check out alternative business funding here.
Maintain healthy personal credit
That being said, when small businesses approach a lender for a business loan they often take into consideration the business owner’s personal credit. Therefore, it is important to keep personal credit in good standing.
Use a business credit card
Getting approved for and using a business credit card for business expenses is a good way to keep business and personal credit separate, and is also a good way to establish business credit when you pay off the balance each month.