Where Do I Go to Get It?
How Much Funding Will I Need for My Business?
As with any financial borrowing strategy, lines of credit can be sticky when it comes to regulations and the bureaucracy that goes hand-in-hand with lending options in general. The Credit Card Accountability Responsibility and Disclosure Act of 2009 (known also as the Credit CARD Act) was passed into law in May of the same year. At that time, it was met with tremendous backlash and criticism by some who feared it would prove detrimental. Looking back, we now know that it undoubtedly has had adverse effects on those applying for lines of credit. From the negative ramifications it passed on to existing cardholders with little or no delinquency history, to the higher interest rates, tougher approval requirements, and the lower credit limits that are currently available, it’s important to tread lightly when making a decision about which institution to partner with.
With the myriad of credit options that are available on the market and the pages and pages of terms and conditions that come packaged up with any new credit card offer, it’s easy for consumers and startups to be misled down a path that’s not necessarily in favor of the new business plan. It may be helpful to consider enlisting some guidance or an experienced third-party to ensure the financing solution of choice is a sound investment and that it’s cash flow friendly to your budget. It may seem like a no-brainer, but positive cash flow can easily be forgotten when it comes time to look for financing. Always look towards choosing a funding option that has reasonably low monthly payments.
Managing Your Funding and Cash Flow for your Budget
The art to balancing your finance option with maintaining a positive cash flow is truly knowing your expenses. Be aware of how much your product or service costs and ideally what it is worth. This way you can determine whether or not you can afford to offer special pricing and still keep up with your financial commitments, not to mention balancing all the other budgetary requirements. A gentleman by the name of Greg Pollak, an entrepreneur and a guest speaker on McKeown’s podcast, offers his advise on how he made it out of Early Struggle: Get paid up front. Don’t be too shy to ask for payment up front so you don’t get trapped in Early Struggle waiting for income. This keeps cash flow positive and frees up more of your external funding for other business needs. Other ideas on getting your cash flow in good working order include creating spreadsheets, and not including what your projected income might be, only your agreed upon sales revenue. This prevents any surprises if said projection doesn’t come to fruition. Build your business on what you know. Rely less on outside sources to build your business, and more on your own personal expertise to shape your offerings and services. This will cut costs and eliminate unnecessary expenses in the critical early stages.