5 Essential Small Business Banking Tips.
Small business owners face myriad challenges in today’s fluctuating markets, not the least of them financial. Aside from hiring and retaining employees, attracting and keeping clients and finding time for a vacation, small business owners have to balance the books and plan for the future – all while turning a profit. This guide gives you five quick tips to build and maintain a solid financial foundation for your business.
5 Essential Small Business Banking Tips.
1. Borrow without sorrow.
According to Statistics Canada, 84% of small business owners in Canada. financed their business with personal savings. That’s not ideal as needs increase, since most entrepreneurs will require an additional capital source to fund growth and expansion. Any borrowing you do comes with interest so be careful to choose your loan product carefully. For example, a business line of credit usually comes with a lower interest rate than a credit card. If you need to use a credit card for the convenience, choose a business credit card with a rate you can live with and a cash back feature for the purchases you make. There are also specific loans and leases with various terms and rates to finance capital such a equipment or inventory.
2. Don’t let your cash flow become a cash drain.
Not all business chequing accounts are created equal and the fees you pay for deposits and withdrawals can vary widely. Particularly for those with businesses that record high volumes of transactions, these fees can mount up quickly. Not all fees are transactional fees either - there can be additional fees for volumes of cash, coin and cheques. Cash management services provided by a financial institution can often minimize costs and rates while maximizing efficiency. Look for ways to save by comparing different accounts and choosing one that will be less of a cash drain.
3. Avoid a souped-up merchant account when a basic will do.
Most retail businesses today offer point of sale payment options given that a large number of customers prefer to make purchases with their debit or credit cards instead of cash. This is great for cash management and record keeping as well. However, be sure that the merchant account service you select fits your needs in terms of services provided and fees. If your transactions are not that high, a volume-based payment plan could result in savings. Do some research and discuss your options with your financial institution.
4. Protect your empire.
Okay, maybe it’s not quite a business empire (yet), but it’s important for you to protect yourself as a business owner as well as your assets by thinking ahead and being prepared.
Coverage such as life, disability and critical illness insurance ensure your business and those who depend on you are protected in case something happens to you.
Types of coverage for your business include property insurance, which covers against water damage, theft and fire, as well as crime insurance, which is highly recommended if you deal with high volumes of cash on site. Liability insurance protects your business from legal actions arising from incidents such as a customer slipping and falling in your store.
5. Save separately for your business and your trip to Acapulco.
If you are a sole proprietor, the line between your personal finances and that of your business can get blurry. However, it’s best that small business owners separate their personal savings from their business savings. This will make it easier to plan for and set funds aside for anticipated business needs, whether it’s office supplies or bulldozers. A long-term savings plan will allow you to borrow less and provide a financial buffer for your business.
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Whether you’re one of the thousands of small business owners in B.C. or are planning to start a business of your own, we’ve got an experienced team that can help you with the banking services and products you need to get your business growing.
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Information and interactive calculators are made available to you as self-help tools for your independent use and are not intended to provide investment and borrowing advice. All examples are hypothetical and are for illustrative purposes only. We cannot guarantee and will not be liable for their applicability or accuracy in regards to your individual circumstances. Other fees and costs may be applicable. Please contact us for full details. We encourage you to seek personalized advice from qualified professionals regarding all personal finance issues.