4 Persistent Myths About Business Finance Busted Wide Open

Going into business for yourself can be incredibly liberating. If you’ve spent years working for someone else, the prospect of being your own boss can be incredibly appealing. You’ll have the ability to choose your clients, the type of work you do, and the prices you charge. Owning your own business can also have a positive impact on your personal finances.

How Economies Benefit

The vast majority of businesses are classified as small businesses, and smaller operators benefit the local economy in numerous ways. They generate wealth, which tends to be redistributed into the local economy, and business owners support other local owners.

 

Small businesses hire local employees, who also spend their money locally, all of which benefits the communities in which the owners and employees live. Smaller businesses tend to have less complex tax returns, and they pay their corporate taxes much more dutifully than tax dodging giants that you might read about in the media.

What About Risks?

While small businesses can be of enormous benefit to the local community, and a passport to a more rewarding career, it would be disingenuous to say that they were risk free endeavors. Only around 50% of businesses make it past their first 5 years and of those, only 25% make it past the 15 year mark.

If your business is struggling, you may be under a great deal of financial pressure. A Pennsylvania bankruptcy lawyer can explain your financial options, and help you make an informed decision regarding a potential bankruptcy filing. Work with a legal expert, and learn about your options.

But the inherent risk of starting a new business needn’t impede smart, capable, inventive, and adventurous people from at least attempting to start their own business.

Even entrepreneurs that fail have a tendency to bounce back stronger for their initial failure. Indeed, failure can be a motivator that leads to bigger and better things. From Thomas Edison to Richard Branson, there are dozens of wealthy and influential people who failed in their early endeavors.

Do You Believe In Myths?

Many would-be entrepreneurs are put off by the notion of failure, or are misinformed by persistent financial myths that lead them to believe it would be impossible or unprofitable to bring their businesses to life and therefore deprive the world of their clever, inventive, and viable businesses ideas.

If you’re recovering from a financial setback, this article may help.

Here we’re going to bust some of those myths wide open and in so doing hopefully empower you with the knowledge and confidence to start your business journey if you haven’t already…

#1: Banks Hate Entrepreneurs

While banks are far from the only game in town, they are a largely reliable source of credit on equitable terms. It’s certainly true that in the wake of the financial crisis of 2007-2008 banks (along with all manner of lenders) have become a lot more careful when it comes to lending money- and this should be seen as a good thing.

Nothing will hamper your business like being given more money than you need or more than you can realistically pay off in your all-important early years. A bank should, in fact, be your first port of call for business funding even if you are a first time entrepreneur. Is there a chance that they might say no? Absolutely.

But a banker may be able to provide valuable feedback, which could make your enterprise more viable with a few subtle tweaks to your business plan.

If you live in the UK, you should most certainly make a bank your first port of call. Even if they are unable to help you, under the Small Business Enterprise and Employment Act of 2015 they are legally obliged to help you find alternative funding, even if they turn you down for a business loan.

#2 Bankruptcy Ends It

While bankruptcy can be an impediment to success in business, we’ve been conditioned by a childhood spent playing Monopoly to believe that a declaration of bankruptcy must be the end of our entrepreneurial ambitions. But all it takes is a look at all the successful business people and celebrities who’ve been declared bankrupt at least once.

Successful people from Walt Disney to Steve Jobs have been able to bounce back and create multi billion dollar empires. Bankruptcy needn’t be the end for your business. In fact, there are benefits of filing bankruptcy when you run a business.

Indeed, it can even save a floundering business, because bankruptcy can help to save a business from creditors who may try to liquidate your assets and buy you the time you need to get your financial affairs in order.

#3 Bad Credit Is a Non-Starter

Bad personal credit can certainly be infuriating, but rarely need it slam the door of business opportunity in your face. Sure, it may make your life a little harder, but wily entrepreneurs with worse credit ratings than yours have been able to find ways of making it work.

When applying for business loan, the lending decision will usually rest with an analysis of your personal and business finances. Of course, if you are a nascent entrepreneur, the decision will be based entirely on your personal finances. Yet, even if your credit rating is disastrous, you may be able to right the ship by getting a consolidation loan.

Not only will a consolidation loan make your debt more manageable, it will be advantageous to your credit score, as it will replace all of your existing debts so that on paper you will only have one debt rather than several. So long as you’re able to meet your commitments to this debt, you’re financial situation can improve greatly over time.

Plus, let’s not forget that there are other funding channels such as crowdfunding in which your personal credit plays no role.

#4 Low Overhead Is The Key To Everything

By all means be conscious of your overhead and make sure that they don’t spiral out of control. At the same time, however, canny entrepreneurs know that a reasonable level of spending is required to succeed. Sure, you should guard against indiscriminate spending, but be aware that under investing in your business can be just as toxic as over spending.

Rather than focus on keeping your overhead down to maintain your profit margins, you should spend with an eye on calculating your investment’s fiscal multiplier and how long it will take for your investment to show a healthy return.

Break Your Mold

If you believe the myths explained above, take a hard look at your beliefs about starting a business and break out of your mold- be open minded. With a great deal of planning and hard work, starting your own business may work for you.

This post is for educational purposes only.

Ken Boyd

Author: Cost Accounting for Dummies, Accounting All-In-One for Dummies, The CPA Exam for Dummies and 1,001 Accounting Questions for Dummies

Co-Founder: accountinged.com

(email) ken@stltest.net

(website and blog) https://www.accountingaccidentally.com/

(you tube channel) kenboydstl