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As owner of a small business, he can feel as a modest taxpayer to the economy, but its impact is anything but small. In fact, small businesses less than a year create 12% of all new jobs, which reinforces that small businesses of all kinds are critical for both the economy and the growth of employment.
While your business has the potential to feed more employment creation than its size suggests, it may be feeling the tension of the economic pressures that many small businesses face today. Last year, the use of small businesses decreased by 51,200 jobs, and income fell by an average of $ 11,850 per business, cord about the annual index report of the small businesses of intuit quickbooks. With the increase in interest rates, inflation and Ferwer’s final options, small businesses seek ways to maintain operations in operation and the flow of cash Mintain, which can present challenges as they evaluate their options to close the cash flow gap.
Credit cards are Finance Source number 1 in the US.
Historically, small businesses have resorted to loans duration of strong economic times and have supported the periods of more difficult credit card duration, and that is exactly what we are seeing today. Due to its accessibility, flexibility and ability to address immediate financial needs, credit cards have become a main source of finance for small businesses such as yours.
Credit cards can be especially useful for managing cash flow, unforeseen expenses and short -term finance. However, that trust has bone that grows faster than reimbursements. The data show that the use of the credit card has increased from COVID-19, and the banks have removed traditional term loans. With less notable financing options, 1 in 10 small companies resort to credit cards such as their main financing tool, trusting them for more than 75% of their monthly expenses.
This raises the question: are the credit cards a reliable way to access finance and administer cash flow in a similar way? The truth is that it depends on how you use them. Here are three tips to ensure that credit cards are the appropriate fine option for your business and when to use them, or not.
Related: I thought I knew finance, then I took my family’s franchise. Here are the hard truths I learned.
Pay close attention to cash flow
When strategically managed, credit can be a valuable tool to grow a business. But, without a plan, it can also be a potential risk of growing debt, which can stop it in the long term.
Understanding how money enters and leaves your business at any given time is the first step to decide whether the credit lever makes sense. To do so, track how your business reacts to sales cycles, inventory fluctuations and economic changes. Understanding and why its cash flowers, either due to seasonal deceleration, late accounts or unexpected expenses, can help you prepare instead of trusting loans. One way to avoid unnecessary debt is to build a financial cushion, such as an cash reserve of three to six months, so that you can handle weak without putting everything on a card.
The more visibility it has in their finances, the better it positioned to use credit cards strategically instead of necessity. Digital tools facilitate this process, with accounting and financial software classified as the most valuable tools by small businesses: 95% of small businesses use digital tools to help manage and grow their business. Correct accounting and cash flow software can help you track expenses, automatic billing and prognosis income trends. In turn, you will have a clearer image of when using a credit card makes sense and when it could lead to more financial tension.
Trusting a counter
An accountant can serve as a second set of eyes in his finances, helping him to make informed decisions about spending, investment and loans. Treating your accountant as an advisor, instead of helping with specific financial tasks such as taxes you can ensure that you have the expert advice you need. They can help you avoid overcoming credit and provide expert guidance on the management of your cash flow.
Beyond day -to -day financial supervision, working with a financial expert provides greater visibility in the general health of your business and can even improve its possibilities of obtaining additional funds. In addition, you can help you track and reconcile your credit card transactions, ensuring that your balances are managed and aligned with your financial objectives.
Related: How to take advantage of credit cards for business growth (in the right way)
Evaluate financing options
Credit cards are of the easiest financing options to access, but that does not always mean that they are the right option for their participate commercial needs. They work better to cover immediate expenses such as trips, inventory purchases or unique costs. But if you hope to make a larger investment a second location, update equipment or hire a new team member, a loan for small businesses is smarter to access lower interest rates and structured refund terms, which makes the issue sustainable in the long term.
Recently I talked to Kate Pawlowski or Done & Done Home, who shared some useful ideas about how he evaluated his finance options. She told me that, although they still use credit cards in trouble, they prefer term loans for investments related to growth, such as hiring or launching something new, because it feels more interest rates. In fact, he said that he has not been notified that the type of expenses he can put on credit cards does not always have a significant impact on his business. The type of expenses that lead to their business to growth, for example, is an expense such as payroll, which cannot be resolved with credit cards.
If the cash flow is unpredictable, consider a flexible financing solution solution that can help without adding high interest debt to your balance. Take the time to evaluate your options and be chosen on your loan partner. Buy to find the best loan rates and the reimbursement terms that are aligned with their commercial needs.
A solid credit relationship can give small businesses that the advantage needs duration of turbulent times, but only when loan decisions are taken strategically. Companies that have the ability to access various sources of capital products and loans will be able to balance their options and make the best financing decision for their spending scenario. Your business is essential for the future of the economy, and ensuring the right finances will help maintain its lasting impact.
