Money Mayhem: Moving Past Financial Setbacks as an Entrepreneur
By Gloria Martinez
Every year, hundreds of thousands of Americans and tens of thousands of businesses file for bankruptcy. Many more untold numbers suffer some form of financial setback. If you have experienced this scenario, you know it’s difficult to bounce back. But difficult is not impossible, and if you are looking to start your own business after a major financial downturn, the tips below can help you get your new endeavor off the ground.
Get your personal finances in check first.
First and foremost, if you’ve had money problems in the past, take care of your personal finances before you try to launch a new business. A few great pieces of advice here are to utilize budgeting tools, know your net worth, set your primary bills – mortgage, water, electric – to an auto pay system, and meal plan each week so that you know how much you’re spending on groceries.
You also want to make a point to look ahead at ways you can protect the personal wealth that you rebuild. One thing to investigate, for example, is forming an LLC when you prepare to launch your next business venture. Contrary to what many new business owners believe, you don’t have to use an attorney to establish your Georgia LLC. You will, however, want to research the regulations in your state first. With a little bit of diligence, you can protect your personal assets and may be able to take advantage of a few tax breaks.
Accept the price of bad credit, and then build better credit.
Unfortunately, bankruptcy, paying bills late, and other issues can wreak havoc on your credit score. These issues can make it more difficult and more expensive to obtain business financing down the road. If you are ready to get your business up and running now, you may still be able to borrow with a lower credit score, but understand that it will cost you more. According to Experian, lower interest rates are typically earmarked for people with a high credit score who have shown credit worthiness.
Once you begin trying to rebuild your credit, you may have to get creative. Masters Credit Consultants recommends applying for a store credit card, which may be a little bit more lenient than a traditional credit card, and asking your current creditors to increase your credit limit. Regardless of how you choose to get your credit score up, keep your accounts current and avoid paying only the minimum.
General money management tips for business owners
Once you get your personal finances in order and have started to build your credit, you’ll still need to make a conscious effort to manage your money well as you get your business up and running. A few ways to do this are to:
Monitor your spending routinely. Look at your incoming and outgoing funds often so that you know where your money is going and where orders and payments are in the pipeline.
Forecast and budget. Look ahead at your next 30, 60, and 90 days. This will give you an idea of your accounts payable and receivable. Use this calculation to forecast how much you will need to spend to continue to meet orders and deadlines.
Watch your inventory. If you keep inventory, rotate it often, and do not hold on to a product line that doesn’t actively turn a profit.
Financial hiccups happen. Don’t let them keep you from living the life you always wanted by continuing your small business owner quest. From forming an LLC to protect your assets and limit your liabilities to rebuilding your credit, the talking points above can put you in a better position to thrive in your entrepreneurial undertakings.
Meet the Writer
Gloria Martinez loves sharing her business expertise and hopes to inspire other women to start their own businesses and seek promotions in the workplace. She created WomenLed.org to spotlight and celebrate women’s achievements.
