This is a sponsored post provided by Bluevine.
Theoretically, the goal of a business is simple: have more cash come in than go out. The difficulty for most small businesses is that your business may be in better shape now than a year ago, but the road between those two points usually isn’t a straight line up. It can feel like you are at the mercy of external forces along the way.
That’s why many veteran business owners get a business line of credit: it puts you in control of your finances. A line of credit lets you add cash to your bank account whenever you need it. Like a credit card, you are pre-approved for a certain amount and can use it anytime, repeatedly, up to that limit. Unlike a credit card, you can use it for anything, including expenses like payroll.
Shegar Thirumalai, a serial entrepreneur and owner of a San Diego-based security company, sought short-term financing even before he had a need. When asked why, he pointed to his previous experience and said, “Even if I don’t need it now, I will always have a reserve. It’s worth it, even if you have to pay a little interest.”
Here are 3 things veterans like Shegar understand:
Good financing is risk-free
Reputable business line of credit providers will charge you only for what you use. That makes it risk-free: if you don’t use it for three months, you pay nothing during those three months. Avoid any line of credit lender who wants to charge you monthly fees even if you don’t use it: if you draw $10,000 at 1% per week and pay it back over the typical 6 months, then you will pay about $700 in fees. But if you add even a small fee of $20 per month over those 6 months, then you are really paying $120 (18%) more in fees for that loan!
The worst time to shop for funding is when you need it
Shopping during a crisis makes you easy prey for shady financiers, while being prepared allows you to negotiate from a position of strength. Many short-term lenders offer confusing terms or long-term contracts with hidden fees to lure in clients who don’t have time to do their research.
In addition, a dip in cash usually indicates other issues – maybe you have a customer who is late on their payment, or you have a big, new client and want to make sure it is perfect. The time you spend looking for funding is time taken from addressing those other activities. So don’t go grocery shopping while hungry, and don’t look for a cash flow solution when you’re in need.
Get rid of stress by being proactive
A business owner’s time is his or her most valuable resource. Whether your business has one employee or a thousand, your time is better spent on the front lines instead of in the back office doing administrative tasks.
In Shegar’s case, having a source of funding in place led to tremendous growth rather than having to turn down a major new account. He was able to land a large client who wanted his services — starting the next day. He used his credit line to front the $20,000 in expenses before cash started coming in from the client.
If you want more flexibility in your finances, BlueVine’s Flex Credit is a fast, simple, and transparent business line of credit. You can get approved for up to $30,000 within 24 hours with absolutely no paperwork. And since you pay only for what you use, it is the perfect way to secure your finances today with no risk or cost to you. BlueVine started out as a invoice factoring company. With Flex Credit, we’ve expanded our offering to continue to take the work out of working capital financing.
The information and tips we’re sharing in this article are meant to be a starting point for your year-end tax prep, so you can be informed and feel confident when working with your accountant. Be sure to check with a tax expert in your country or region for any specific advice you need, as each business (and tax district) is different. As our lawyers would say: “This article is for informational purposes only. It should not be considered legal or financial advice.”