As a business owner, it’s normal to have financial fears, like worrying about not having enough money in the bank. While this is a natural concern, building a safety net can help put your mind at ease.
If you don’t have a financial safety net for your business, now’s the time to take action. Here are five way you can build your safety net.
Without invoice factoring, you’re constantly at the mercy of your clients as you only get paid when they decide to pay you. Even if you have a contract that outlines payment terms and conditions, it doesn’t mean your clients will always follow through.
Fortunately, with invoice factoring, there’s a better and faster way to get paid for outstanding invoices. And with that, you instantly build a reliable safety net. Here are some of the many ways that REV Capital can help:
Don’t waste any more time before experimenting with invoice factoring. It could provide you with the financial safety net you’ve been seeking.
A business line of credit allows you to borrow up to a certain amount of money and will only charge interest on the amount of money borrowed. It works in the same way as a business or personal credit card.
Here are some of the pros and cons of a business line of credit.
Flexibility: A business line of credit offers a lot of flexibility, allowing you to borrow and repay funds as needed, up to your credit limit. This can be helpful for managing cashflow, seasonal expenses, or unexpected expenses.
Lower interest rates: Business lines of credit typically offer lower interest rates than credit cards (and unsecured loans), which can be helpful for businesses that need to borrow funds over a longer period of time.
Build credit: Consistent and timely payments on a business line of credit can help build your business's credit score, making it easier to access other types of credit in the future.
Fees: Business lines of credit often come with fees such as application fees, annual fees, and transaction fees.
Collateral requirements: Some lenders may require collateral to secure a business line of credit, which could be risky for your business if you are unable to repay the borrowed funds. You’re at risk of losing your collateral should you miss a payment.
Short repayment terms: Business lines of credit typically have shorter repayment terms than other types of loans, which can make it difficult for businesses to repay the borrowed funds in a timely manner.
Just as you would with your personal finances, consider using a business savings or checking account to act as an emergency fund. Here are some of the many benefits of building an emergency fund for your business.
Peace of mind: Having an emergency fund in place can provide peace of mind knowing that your business has a financial safety net in case of sudden events such as natural disasters, economic downturns, or unexpected expenses.
Financial stability: An emergency fund can help stabilize your business's finances in times of crisis, allowing you to continue operations even if you experience a temporary loss of income.
This can be particularly important for small businesses that have limited cashflow and may not have access to other sources of financing if disaster strikes.
Improved borrowing capacity: Building an emergency fund can also improve your business's borrowing capacity.
Lenders are more willing to extend credit to businesses that have a healthy cash reserve, as this indicates that the business is financially stable and has the ability to repay the borrowed funds. This can help your business secure more favorable terms.
Key person insurance is a type of life insurance that is designed to provide financial protection to a business in the event that a key employee, executive, or owner dies or becomes disabled.
For example, if you’re the business owner, you’re a key person. You are critical to the current and future well-being of the company.
Key person insurance provides a death benefit to your business in the event that the insured key person dies. The benefit can be used to cover expenses such as hiring and training a replacement, paying off business debt, or compensating for lost income.
Review your finances to answer these two questions:
If you identify debts, no matter the type or outstanding balance, implement a plan for paying them back as quickly as possible. Furthermore, if any of these debts have personal guarantees—meaning that you’ve taken personal responsibility for repaying them—attempt to eliminate them.
Less debt means more flexibility to use your revenue how you best see fit.
Business owners should be able to buy new equipment, comfortably manage payroll, and be able to reinvest in their business as they see fit. If you’re feeling bogged down by your financial circumstances, it’s time to build a safety net for your business.
At REV Capital, we’re here to help you establish a safety net through the help of invoice factoring. As your business grows, so does your financial limit. Contact us online or via phone at 855-489-0310 to learn more.