The Worst Creative
Business Financing Strategy Ever?

Creative business financing strategies are nothing new to small business owners.

In many cases, a creative business financing approach may be the only choice available for the business owner or manager.

A poor product, marketing again.

Or an undefined customer group..yep, marketing one more time.

For a small business everything is directly or indirectly related to marketing.

And even with a well thought out marketing plan, things still go wrong.

Why? Because even the best laid plans often go awry.

Creating a small business is a process full of trial and error. In many cases, its not that the business could not succeed, there just wasn't sufficient time to figure out how to succeed.

Which brings us to the worst creative business financing strategy ever.

Here's how it work.

The would be entrepreneur develops what they believe to be a sure fire business plan that can't lose.

Unable to locate any form of start up capital, they start their business with credit cards as the only source of financing, and an expectation of sustainable business results within 3 to 6 months.

If everything goes well, the debt will be retired within a year and funds will start building in the bank account.

Sounds Good, right?

I mean the thinking lines up perfectly with all the get rich quick business opportunities that exist on and off the internet today where some of them even try to convince you to use your credit cards because the opportunity is soooooooo good and can't miss.

The problem is that every business can miss.

Every single one.

And the vast majority do fail.

Have you ever spoken to someone who runs a successful small business, perhaps one that's been around for 10 to 20 years?

If you take the time to ask one of these entrepreneurs about their start up period, what you learn may shock you.

Even some of the most successful small and medium sized businesses out there today had some hairy moments making a go of it in the early years.

And some times the difficult early years lasted for several years.

The point here is simply this.

The process of getting a business operating and successful can take many unexpected twists and turns, no matter how diligent you are in creating a thorough business plan.

Therefore, to increase your probability for success you need to allow for the unknown, the unplanned, and the unfair.

A business financing strategy that cannot accommodate unforeseen events is not much of a strategy.

A business financing strategy that is based on high interest credit cards that can destroy both your cash flow and your personal credit is also not much of a strategy.

To improve your odds of small business success, here are some tips for developing a solid business financing strategy.

Invest Your Own Cash

If you have some of your own cash penciled into your business financing strategy, it will immediately increase your likelihood of getting some sort of start up loan.

The more "skin" you have in the game, the more interested a lender will be in approving your loan request.

There is also something to be said about the psychological incentive of losing your own money and the motivation it creates for you to work harder to keep it.

Create Contingencies in Your Cash Flow

Whatever you estimate your working capital requirement to be, double it. At least increase it by a factor larger than 1.

Things can and will go wrong, so give yourself a fighting chance and allow for less than perfect results.

Use Credit Cards Wisely

Used properly, credit cards can be the cheapest form of working capital that you have at your disposal. <br><br>

Some business credit cards provide 40 days of interest free financing. If you pay off the entire balance every month, you have an extremely low cost of working capital financing.<br><br>

But if you start carrying large balances without paying them down monthly, you will go from the cheapest source of working capital to one of the most expensive, and you will likely also destroy your credit rating in the process.

Make Timely Government Remittances

Small businesses are by default tax collectors. And the taxes collected can sometimes wind up funding the business for longer periods of time than they were ever intended.<br><br>

Using government remittances as a business financing strategy is basically a bad idea. Government agencies that are assigned to collect from you have large budgets and enough broad sweeping authority to create plenty of grief for you if you are too slow in paying. <br><br>

If you apply for a business loan while you have an overdue balance with a government tax agency, your loan request will likely be declined. Even after the balance is paid up, you may have burned your bridge with the lender as a history of overdue government remittances can brand you as a bad credit risk.

Don't Spend Money You Don't Have.

Any potential sale can fall apart.

Too often small business owners start spending their profits before they're earned. And even after the sale is made, the cash may still need to be collected.

While marketing will always be the single most important area to focus on, cash flow is a close second. So make sure you spend enough time managing the sales, closing, and payment cycle.

Watch Spending Closely At Startup

One of the things you can control early on is how much you spend and what you spend it on. This is going to change in time, but if you can spend wisely in the beginning you may be able to avoid a cost cutting exercise further down the line.

While its normally true that you have to spend money to make money, you can still be smart about the spending process.

Summary

A good business financing strategy is one that will allow you ample time to get your business on track and cash flow positive.

Make cash flow management a priority and build allowances for the unexpected events into your spending estimates and financing requirements.

The road to business success can be a test of stamina so set yourself up for the long race.

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