How to avoid the top five small business finance mistakes
Writing for Business Advice, Ian Watkinson, chief commercial officer at invoice finance provider Clear Funding, outlines some of the typical finance mistakes often made by owners looking to inject their business with instant cash.
A successful business is built on strong working capital. Access to available cash is essential to enable you to invest in the people, premises and stock that you need to run and grow your business.
But most small business owners will, at some point, find themselves lacking in funds. This is, sadly, because theyve had to wait a long time for payment, with small British firms owed a massive £67.4bn in unpaid invoices.
There are some quick and easy ways to plug these gaps but, with poor payment practices in the UK forcing 50, 000 businesses to go under each year, far too many small firms panic into making avoidable finance mistakes.
If you’re in a rush to access money and ease cash flow, beloware five typical finance mistakes you should avoid.
1. Giving up control of the customer relationship
A business is built on the strength of its customer relationships. It might be tempting to let a third party take control of these for a quick cash injection, but this is a short-term view and can throw away years of work establishing strong connections.
When accessing short-term funds, you should be in control of everything including your customer contacts.
2. Paying over the odds on fees
One of the biggest issues with small business financing is the amount of jargon that comes with it. Complicated APRs and terms and conditions can all cover up the true costs.
Make sure you know exactly where you stand with a provider which can give you a straight fee.
3. Wasting too much time on paperwork
In the past, business owners have had to enter endless bureaucracy with the banks in a vain attempt to open or extend a credit facility.
It really doesnt have to be that time-consuming, so look at some alternative options which won’t take you away from the activities which make a real difference to your business.
4. Paying to repay early
You wouldnt think that paying back a loan before the end of its term would be an issue, but too many small business ownersare hit with early repayment charges.
If you know you will want to settle as soon as possible, make sure you have the option to pay back early at any time, without being charged.