You’ve made the decision to start your own business. Perhaps you already have a business plan, or perhaps you’re still in the brainstorming stage. Regardless of how far along you’ve come in your plan, your financial capability to start a business will be the cornerstone of your endeavor. Developing a solid financial foundation for your business is crucial in allowing you to navigate the inevitable bumps and surprises along the way. Taking steps now to improve your finances will provide a framework from which to launch your future business.
Create a Financial Plan
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It goes without saying that having a financial plan will greatly reduce your excess spending while allowing you to bank much-needed business capital. Calculate the amount of money you need to start your business comfortably (keeping in mind the possibility that you may need additional funds in an emergency), and create a financial plan that will generate this amount by the time you intend to start your business. Plan for major expenses, whether business-related or personal, and set aside an amount for savings. Set manageable weekly, monthly, and quarterly goals that fit into your overall time frame, and hold yourself accountable to them.
Refinance and Consolidate Your Student Loans
Student loan debt can be a heavy burden when you are planning to launch a business. Refinancing and consolidating student loans can lessen this burden by combining multiple private and federal loans into one loan with a lower interest rate and lower monthly payment. If you have an excellent credit score and credit history, you’ll be able to secure a loan that allows you to have even greater financial freedom. A variety of reputable student loan consolidation companies can help you refinance and consolidate your loans.
Transfer Your Credit Card Balances
If you have credit cards with high interest rates and outstanding balances, you can benefit by transferring the balances to other credit cards or personal loans. Most credit card companies offer special rates for balance transfers, such as 0 percent APR on balance transfers for 12 months (often with a balance transfer percentage fee). These offers are dependent on your credit score, credit history, income, and employment. Taking out a personal loan from your bank or credit union is another way to consolidate your credit-card debt and pay a lower monthly payment with a lower interest rate.
Increase Your Credit Score
If you intend to take out any loans for your business, having an excellent credit score will increase your likelihood of securing a low-interest loan in the amount of your choice. To increase your credit score, continue paying your bills on time and take steps to reduce your credit-card utilization ratio. It’s best to keep your credit-card utilization ratio under 30 percent, thus, if your credit limit is $6,000, you should keep your balance below $2,000. Increasing your credit score takes time, so start now.
Making plans to start a business is an exciting time. However, it requires a commitment to taking the necessary steps to improve your finances. Along with reducing your monthly payments and improving your credit score, your financial plan will keep you on track to develop the funds you need to launch your business.
