When it comes to starting a small business and to aim for its success, you only need a unique idea. After the idea comes the financial affair. You must have some kind of capital to start with. If you don’t have the cash up front, you can acquire it from various financial sources. Your business can become a reality, if you have a plan and if you kept your financial house in order before the business idea came. Yes, before you open shop, it is time to review and assess your personal finances because if you don’t know how to manage your personal finances, how are you going to manage your business finances? Let’s take a look at the next step.
Once your personal finances are in order, you can try to get a business startup loan because your credit should be in good shape. Lenders will now look at you as being financially safe. Remember, no lender wants to embrace any type of business risk. So, lenders will take a look first at your personal credit history. This provides the lender with information about your repayment history, debt balance and shows the lender how financially responsible you are. With a solid credit rating, you will be able to show the lender that you take your finances seriously and you will repay the loan, whether your business goes through a rough time or not.
Having a good personal finance record will also impress vendors and build a trustworthy relationship between your business and the vendors. With no track record when starting a business, you have to rely on your reputation and good name in order to reassure vendors of your sincerity, reliability and trust. With a not-so-good personal financial history, vendors will be more cautious in doing business with you.
Initial Survival State
For a new business startup, it may be a several months to years before you see a profit. If you can survive the initial stage of starting a business by living conservatively on a budget, you could do well in the future. Create a realistic business and financial plan to get you through the initial stage. Try to reduce your personal debt as much as possible so you won’t be overwhelmed by expenses and debt.
Be sure to handle any tension in the family as it relates to finances. You and your spouse have to come to an agreement about your standard of living. Once you are on the same page financially, it will make it easier because you will now have the support needed to progress. Tensions caused by financial trouble can impede your business.
The Immediate Solution
Create a finance checklist of things that you will do to clean your financial house. These include pulling your credit report to view your credit history. In so doing, you can fix any mistakes that you might see. You should also have an emergency fund for paying living expenses up to three months. Create a budget in your household and stick to it. However, be sure to discuss this with your entire family first.