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Avoiding the top 7 business financing mistakes is a key component in business survival.

If you start committing these business financing mistakes too often, you will greatly reduce any chance you have for longer term business success.

The key is to understand the causes and significance of each so that you’re in a position to make better decisions.

>>> Business Financing Mistakes (1) – No Monthly Bookkeeping.

Regardless of the size of your business, inaccurate record keeping creates all sorts of issues relating to cash flow, planning, and business decision making.

While everything has a cost, bookkeeping services are dirt cheap compared to most other costs a business will incur.

And once a bookkeeping process gets established, the cost usually goes down or becomes more cost effective as there is no wasted effort in recording all the business activity.

By itself, this one mistake tends to lead to all the others in one way or another and should be avoided at all costs.

>>> Business Financing Mistakes (2) – No Projected Cash Flow.

No meaningful bookkeeping creates a lack of knowing where you’ve been. No projected cash flow creates a lack of knowing where you’re going.

Without keeping score, businesses tend to stray further and further away from their targets and wait for a crisis that forces a change in monthly spending habits.

Even if you have a projected cash flow, it needs to be realistic.

A certain level of conservatism needs to be present, or it will become meaningless in very short order.

>>> Business Financing Mistakes (3) – Inadequate Working Capital

No amount of record keeping will help you if you don’t have enough working capital to properly operate the business.

That’s why its important to accurately create a cash flow forecast before you even start up, acquire, or expand a business.

Too often the working capital component is completely ignored with the primary focus going towards capital asset investments.

When this happens, the cash flow crunch is usually felt quickly as there is insufficient funds to properly manage through the normal sales cycle.

>>> Business Financing Mistakes (4) – Poor Payment Management.

Unless you have meaningful working capital, forecasting, and bookkeeping in place, you’re likely going to have cash management problems.

The result is the need to stretch out and defer payments that have come due.

This can be the very edge of the slippery slope.

I mean, if you don’t find out what’s causing the cash flow problem in the first place, stretching out payments may only help you dig a deeper hole.

The primary targets are government remittances, trade payables, and credit card payments.

>>> Business Financing Mistakes (5) – Poor Credit Management

There can be severe credit consequences to deferring payments for both short periods of time and indefinite periods of time.

First, late payments of credit cards are probably the most common ways in which both businesses and individuals destroy their credit.

Second, NSF checks are also recorded through business credit reports and are another form of black mark.

Third, if you put off a payment too long, a creditor could file a judgement against you further damaging your credit.

Fourth, when you apply for future credit, being behind with government payments can result in an automatic turndown by many lenders.

It gets worse.

Each time you apply for credit, credit inquiries are listed on your credit report.

This can cause two additional problems.

First, multiple inquiries can reduce you overall credit rating or score.

Second, lenders tend to be less willing to grant credit to a business that has a multitude of inquiries on its credit report.

If you do get into situations where you’re short cash for a finite period of time, make sure you proactively discuss the situation with your creditors and negotiate repayment arrangements that you can both live with and that won’t jeopardize your credit.

>>> Business Financing Mistakes (6) – No Recorded Profitability

For startups, the most important thing you can do from a financing point of view is get profitable as fast as possible.

Most lenders must see at least one year of profitable financial statements before they will consider lending funds based on the strength of the business.

Before short term profitability is demonstrated, business financing is based primary on personal credit and net worth.

For existing businesses, historical results need to show profitability to acquire additional capital.

The measurement of this ability to repay is based on the net income recorded for the business by a third party accredited accountant.

In many cases, businesses work with their accountants to reduce business tax as much as possible but also destroy or restrict their ability to borrow in the process when the business net income is insufficient to service any additional debt.

>>> Business Financing Mistakes (7) – No Financing Strategy

A proper financing strategy creates 1) the financing required to support the present and future cash flows of the business, 2) the debt repayment schedule that the cash flow can service, and 3) the contingency funding necessary to address unplanned or unique business needs.

This sounds good in principle, but does not tend to be well practiced.

Why?

Because financing is largely an unplanned and after the fact event.

It seems once everything else is figured out, then a business will try to locate financing.

There are many reasons for this including: entrepreneurs are more marketing oriented, people believe financing is easy to secure when they need it, the short term impact of putting off financial issues are not as immediate as other things, and so on.

Regardless of the reason, the lack of a workable financing strategy is indeed a mistake.

However, a meaningful financing strategy is not likely to exist if one or more of the other 6 mistakes are present.

This reinforces the point that all mistakes listed are intertwined and when more than one is made, the effect of the negative result can become compounded.

Over 78% of businesses in the United States are set up as a partnership or individual ownership. For most of these small businesses, this type of ownership can put your business and your personal liability at risk. Having suitable and sufficient small business liability insurance protects your business and you as an individual from financial ruin.
A common problem for a limited company or an incorporated company is the business owner may believe he or she is totally protected from personal liability and that liability insurance is not necessary, this however is not the case, you can be personally liable if:

•  If you have signed a personal guarantee for a loan.
•  If you personally injure someone.
•  If you act in an irresponsible manner.
•  If you act in an illegal manner.
•  If you do not operate your business as a separate entity.

What is Business Liability Insurance?
Business liability insurance protects your small business if there is a lawsuit for personal injury or damage to property. The insurance will cover the damages from a lawsuit and cover legal costs. There are many types of liability insurances depending on your business needs. If you have concerns on this matter seek legal advice.

Are you interested in starting up your own business?  If so, you should carefully consider writing a business plan.  The thought of preparing a business plan tends to fill most business owners with dread; it can be a difficult, stressful, and time consuming process.  For this reason alone you may want to think about seeking assistance.

One of the many ways that you can seek help to write your plan is by hiring a professional, who in this case is a professional business plan writer.

What Is a Professional Business Plan Writer?

Before deciding whether or not you should hire the services of a professional business plan writer, you should first clearly understand what they are.  In most cases, you will find these individuals to be experienced, professional writers who are well versed in business terminology and who can effectively understand the needs of businesses.  It is important to understand when writing anything, even a business plan, that it is the wording which makes all the difference; the words used can be the difference between success and failure. That is why a large number of small business owners turn to professional writers for assistance.

What a Professional Business Plan Writer Can Do For You

When it comes to searching for a professional business plan writer, you will find that different writers perform different duties. For example, a large number of writers will merely take your ideas, which you have already thought out and developed, and present them in a professional matter; they will just present your plans in a more professional way than you could.

Then there are the professional business plan writers who will work with you to develop your plan from the inception of the basic ideas for your business to the finish document.  Naturally since more work and time goes into to assisting you with developing a business plan from the bottom up you will probably find that the services of these writers cost more than traditional ones.

It is important therefore that before you start your search you be very clear in your own mind as to what level of support and input you require.

Why Hire a Professional Business Plan Writer?

There are a number of different reasons why small business owners turn to professional business plan writers. One of the key reasons is of lack of experience when it comes to putting ideas on paper and not knowing what format a plan should take.  If you have never created a business plan before you can easily find yourself staring at a blank piece of paper for hours on end!

Although it is relatively easy to learn how to create your own plan, it can be a time consuming process to undertake the research and get into the appropriate mindset. With the right experience, a professional business plan writer will be able to create a detailed, professional business plan in half the time that it would take you to create the same plan.

When planning your first small business website, there are three essential questions you should ask yourself:

1. Who is your target audience?
2. How will your target audience find you?
3. How will you convert your visitors into sales?

These questions sound obvious, but it’s amazing how many people don’t bother…and then moan that “our website doesn’t bring us any business”.

1) Who is your target audience?

Give a great deal of thought to your target market. Who do you want to attract to your website? Why? The answer to that is more than likely to sell them something – a product, a service, or an idea perhaps.

Claiming that your market is anyone and everyone is far too vague, and your website will lack focus, and fail to maximise its potential. Ideally you should be aiming to create a niche.

2) How will they find you?

Creating a niche will also help you with the search engines, and drive hot leads to your site.

Consider what keywords your target market might type into a search engine to find you. Actually do the searches yourself. Who comes up in the top 30? Because that’s where you need to be. Are your competitors there? Look at their sites. Do they work? How can you improve on them? Identify something unique about your business that sets it apart from the rest.

Those keywords – or keyphrases to be more accurate – need to be incorporated into your pages of your site – in the page titles, in the headings, and in the internal links.
Be specific with your keyphrases. They will be less competitive than the more general single word searches, and will more accurately target your market. You may have to localise or specialise to get in that top 30 – and the top 30 is where you need to be to drive traffic to your site. As I am sure you are aware from your own experience, if you haven’t found what you are looking for in the first 3 results pages, you look elsewhere.

The key to achieving high search engine rankings is building inbound links to your web pages – that is pages on external websites that link to pages on your site. Crucially this link acquisition should be a natural growth – where inbound link count increases at a gradual pace. The pages that link to yours should be relevant, on-topic and ideally contain the same keywords – especially in the linking text. Search engines rank pages based upon their reputation – your ranking will be determined by what other (preferably high ranking) pages say about your page.

3) How will you convert your visitors into sales?

Don’t just tell them what you do or sell. Tell them why they want it (yes, want – not need). Offer incentives, freebies, discounts – anything to get that dialogue started.

Current research indicates that the human brain makes a judgment about a web page within a twentieth of a second! That doesn’t leave you very long to make an impression. So, make sure that you have your Unique Selling Point (USP) clearly visible on your home page – and preferably prominent on every one of your other pages. After all, it’s not a given that the home page will be the first page that the visitor sees, particularly if they have found you via a search engine.

Then make sure that you list your bullet-pointed guarantees. Visitors have to understand why you are different from the rest, and why they should deal with you and not your competitors. And as we’ve discovered, they have to understand this pretty much instantly.

Lastly, make sure that your site has a funnel-like structure. Identify your important pages – usually the “call to action” or purchase pages – and make sure all roads lead to those pages. Your internal links – like their external equivalents – should describe the target page. If you sell blue widgets, don’t call your products page “Products”, call it “blue widgets”, and make sure that the links pointing at this page also say “blue widgets”. This will not only help the search engines identify and rank the most important pages in your site, it will also lead your visitor to that all important conversion.