Maintaining Small Business Capital

Being in college everyone knows that there are the kids that pay attention in class and actually learn, kids that slept through class because they partied too hard the previous night, and those that did what they could to barely get by. After spending so much time in those marketing, economic and finance classes, the ones that paid attention and actually learned are the ones who turned out to be successful in business. The others now have to struggle in the real world and learn things they should have known already.

Having small business working capital at all time is one of the basic requirements for a business. One way to fulfill that requirement is by guaranteeing a strong cash position. To have a strong cash position what you want to do is take out business credit cards, lines of credit, and basically borrow against the money you have in the bank. The number one thing you don’t want to do is pay for anything with cash. If possible why not use someone else’s money instead of your own?

When starting a business almost everyone needs a small business loan, if you fell into this common category and are starting to see some positive results with your business don’t make paying back your loan as quickly as possible your priority. Just making sure you pay off your charges on time will build your credit rating and if you keep your profits in the bank instead, your company’s value will increase. With a higher net worth it will be easier to obtain a security loan if you are ever in need of it. However, if you are steadily building your profits and making the payments on your loans just continue the good work.

One major rule when running a small business is to make sure you are completely aware of what you owe, loans, and how much revenue you will receive. Sounds like a pretty obvious rule, but you would be surprised at how many small business owners fail to match up their loans with their incoming numbers. Once your incoming numbers are lower than the money you owe, you must immediately address the issue.

Another basic rule any small business owner should follow is to pay for your inventory via credit card, or working capital line of credit. Using cash to buy your inventory will prevent you from returning anything if it does not sell after a certain period of time. Obviously you always want to have options available to you especially when running a small business. If you paid attention to this, just like you did in college, then you are now much more informed on how to maintain working capital for your business.