Determine if You're Running a Healthy Business - Questions to Ask Yourself
Have you ever thought of taking your business’ temperature, making sure it’s healthy? The most pressing issues most business owners always think about are often tied to providing good products or services, generating enough sales, building customer relationships and managing employees.
Although these are important, one main area most business owners overlook is the depth of evaluating the health of their business. Many believe if they see their revenues going up year after year, that it’s enough for them to know they are doing well. Unfortunately, looking at revenue is not enough. What about profits, cash flow, accounts receivable, and emergency funds? What does your credit profile say about your business?
Most financial institutions, like Select Funding, look closely at the health of your business rather than your FICO score. Understanding and maintaining this, is one of the four things you should do before applying for financing.
Here are some questions to ask yourself to determine if your business is on a healthy track.
Are you seeing a profit?
It’s important to understand the difference between money coming in and your profits. Make sure you calculate your expenses and see if you have any money left over. Always be aware of any increases in your overhead expenses. A healthy business always sees its profits increase year after year.
Don’t think that just because your customers pay you that you turn a profit on the payment. If you bill your customers, make sure you get paid on time. Past due bills are a common reason for lost profits.
Do you have a rainy-day fund?
Make sure to always set aside some cash for emergency expenses or take advantage of sudden opportunities. How much you set aside depends on the nature of your business, but anything helps.
What does your credit profile look like?
The way your business is reflected on your business credit profile can make a difference when you start seeking financing. As mentioned before, your credit score is not the only determining factor for a lender to approve your business for financing. There are other factors that are considered in the decision. Select Funding CEO, Brian Spratt says, “As alternative lenders, we understand that running a business often requires you to use personal credit as leverage for your business and when business slows, your credit can suffer.”
Lenders like Select Funding look past your actual score and determine your approval based on other factors they see in your report. Let’s say a construction business has a fair credit score but doesn’t show any collections inquires or overdue debt on their credit report. In this case, some alternative lenders will consider this a healthy business because it proves that this business is trustworthy with their payments.
Having these types of positive points on your profile will help you get more loan options, better terms, and better interest rates. Always try to check your profile often to ensure everything looks good and fix anything that needs attention.
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