Keba Rice

Your passion can either be a business or a really expensive hobby, if you don’t have the right tools to sail through these economic waters. Money is crucial to the growth of your business and lack of it can sink your ship. It is said that most businesses fail within 5 years but we are in a time where if you have passion, persistence and money, your business can succeed.

Which of these 5 options are you using to finance your business?

1. Saving
You can invest in your business from you own wallet. This is where most entrepreneurs find their financial backing. If you have no savings start by putting away $20, $50, $100 or more a month towards your passion. Start saving something and you will have money in no time.

2. Grants
The Small Business Association (sba) has business grants are available for entrepreneurs. You need to go to Sba.org and apply. Some grants are bias and you can only receive funding if your business is in a particular market. There are other organizations that can help fund your business, just ask google.

3. Partnerships
You may have to seek investments from family, friends and even venture capitalists. To get funding, you may have to give up a piece of your company. If you are ok with that, partnership may be a great idea to fund your business.

4. Loans
Your bank may be willing to loan you money, if you fit the right credit profile. Banks usually require a business plan along with financials to see if your business is worth the risk. If your business is not making any money more often than not the banks will not lend you a dime.

5. Crowdsourcing
One of the biggest phenomenon of the Internet is crowdfunding. People who don’t know you are willing to give money to you ideas and business. On some platforms there is a medium of exchange that needs to occur the higher the level of funding.

There are many options available for funding. It’s important to find what is best for you. In the end, it’s is all about growing and running a successful business. How are you financing your business?

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Your credit can enable or hinder you from growing your business.  A credit score is a measure of how trust worthy your are with someone else’s funds. Your business needs it’s own credit line and score. Business credit  is based on your overall history of making payments and how well you use the line of credit given to you. It also includes your personal credit score. Late payments and the timing of when you opened your credit is also factored in when calculating your score.There are ways that you can improve your credit health. You can also look into funding from various sources for your business. The more credit and funding you have, the better the business.

Pay Down Debt

Once your debt is paid, you increase your credit utilization. Using less than 30 percent of your credit line will increase your score drastically. Take this advice, never ever become dependent on credit. Consider bootstrapping as much as possible to limit debt accumulation.

Ask for a Higher Credit Limit

Ask and you shall receive (if you’ve been managing your credit wisely). This task would only take ten minutes out of your life and can increase your credit score into the double digits. Your card company will ask you about your income to start the process. As a warning, sometimes asking for an increase may be seen as a hard inquiry (ouch). So take heed to the warning.

Establish a Line of Credit with Vendors and Consider Other Sources of Funding

Some manufacturers may offer you a line of credit for your products and services. These companies will do a credit check and grant you an amount that you can use. Terms of manufacturers are usually net 30, meaning you have 30 days to make your payment from the time of purchase. You can also consider other sources of funding that you may not have to pay back. There are business grants where you can apply for funding with an organization or the government. SBA .gov is a quintessential website for small business looking for funding. There is also peer to peer lending and crowdsourcing that can help you with funding.

Be a Customer at a Few Banks 

Diversify your lenders. Don’t only have one bank that you work with. Have banks compete for your business. Go with the bank that offers you the best rates. If your business have good credit, bank will be calling you to offer you loans at low APR’s.

Banks Want a Track Record

Track all of your expenditures and accounts accurately. There are many software systems to make accounting seamless. The more you track the better. Banks are the least likely to loan money to new businesses due to the risk associated to new businesses. Use your business credit card and if possible, use that card for business spending only and save and organize all of your receipts. Fyi, Banks not IRS like the co mingled of your personal funds with business funds.

Enjoy credit responsibly and remember “Cash is King.”

You maybe born rich or poor but you ultimately determine your wealth. Wealth is a state of mind and your mind determines your pockets. Many people are nonchalant about savings but fail to realize why they struggle. The lack of savings plays a major role and those habits are taught. Poor money habits can be broken and where there’s will, there’s way. Here are some tips on how to build wealth through savings.

Where are your savings going?

Most people save by placing their leftover funds into a traditional bank. The bank uses the money for lending and capital accumulation. You may ask why should I care? You should care because the bank gives you a minuet portion of what they earn from interest by lending your money to others. Banks use the rule of 72. The rule of 72 is a calculation of how long it takes your money to double. For example, the bank will give you 3% for a one time deposit of 10k and it would take about 24 years for your investment to double. The bank invests (either by giving out loans or stocks) your money at a 12% interest rate and that 10k become 20k in 6 years. To solve your savings issue, you can invest in a mutual fund. A mutual fund is a collection of assets (stocks, bonds and cash) that is managed. People contribute to a fund and get a higher rate of return. Instead of 3% you may receive 6-9% on average. Your money is also protected against inflation where as if you keep your money in the bank you risk a loss due to inflation. You can usually get a better ROI (return on investment) and inflation protection with a mutual fund than having you money sit in a bank or under a mattress. Keep in mind that you can have a loss of capital by investing but the risk outweighs the benefit of keeping your money in the bank.

Have benchmarks for short-term, mid and long-term savings goals

Ask yourself “what is the least amount of money that I want in my short, mid and long-term savings?” For example you can decide to have $2k short-term, 10k mid-term and your 401k, 403b, plus 1 million long-term. Once you’ve set those clear goals, saving money will be easier for you. If you do not set benchmarks you are likely to fail moving your wealth dreams to reality. You need to define where you want to go.

Wealth challenge

Find an investment bank money and set up an account. Time out of life (TOOL): 1 1/2 hour.