By Lewis Khan

Launching a brand new business is always a thrilling experience! But in the initial stages, to get it off the ground you have to depend upon the capital that you already have.

Of course, you might think of hunting down some funding options for your business. But doing so would only lead you to pay huge amount of interest and before you get the chance to take off, your business would’ve already landed in bad debts. Yes, there are many entrepreneurs who start on a shoestring budget, but that’s merely because they don’t have enough to splurge.

However, if truth be told, you can apply much of what you’ve learned through managing your personal finance to your present business as well. In fact, the lessons that you learn would help you grow the business at a hale and hearty rate. Moreover, only in the initial phase of your venture will you understand the basics of business finance through ‘trial and error’ method.

So, if you’ve come to the point where you require help, do not allow lack of finance to dishearten you. Below are a few effective personal finance tips and tricks, which could be handy enough when it comes down to growing a business.

1. Prepare a Proper Budget

Managing finances can be an intimidating task in your personal as well as professional life, which is why preparing a budget becomes imperative. Not only can you scrutinize your monthly income and expenditure, but you can also be financially prepared to tackle unforeseen events such as unanticipated expenses or investment opportunities.

You can simultaneously manage your personal and business expenditure by following these steps:

  • Work on your business expenditure: This mainly includes everything from rent, payroll, and office supplies to the interests on loan that you pay off every month.
  • Work on your taxes: You must always determine the tax rate. If not, then you’re likely to find yourself in trouble with the law and of course it’s a situation we will avoid being in at all costs. It is in your best interest to either hire an accountant who knows about the constantly changing laws and rates, or get yourself well-versed with the taxes.
  • Work on your revenue: Once you have figured out the taxes and operating expenses, the remaining amount is considered  “net profit.” From this point, you can make a decision of giving yourself a fixed income, which can be budgeted easily.

2. Trim Down the “Debt-to-Income” Ratio

The debt-to-income ratio is generally considered as a means of measuring personal finance, where you compare the debt that you already have with your overall revenue. Loan providers often use this measure as a way to check your ability to handle your monthly payments and how you would pay off the borrowed money.

You can calculate this ratio by simply dividing the sum total of your recurring debt by the monthly revenue. Say for instance, if your recurring debt is $2,000 and the monthly revenue is $6,000, then the debt-to-income will be 0.33%.

There are basically two ways to trim down the debt-to-income ratio, which is:

  • Reducing the recurring monthly debt
  • Raising the monthly revenue

Of course, reducing your debt every month could be a challenging task. A better to way to achieve this is to determine what are your business’s needs and wants. For instance, you can simply rent a brand new office space instead of buying it. You can even outsource your work rather than employing full-time staff. Not to mention, you could trim down the fat even after preparing a budget, as you might come across some unnecessary monthly expenditure.

For raising the revenue, you can look out for several streams of income. While you’re starting your new business, you could look out for some side gig through which you could make money in order to pay off the debts.

3. Enhance Your Credit Rating

Your credit rating has a huge impact on the possibility of you getting an approval for a loan, line of credit and financing. With a bad credit rating you might end up paying higher interest rates for bank loans or credit cards. This could further become a problem whenever the business would have to depend on financing to shoot up, such getting the mortgage approved for purchasing office property.

There are numerous ways to enhance your credit rating which is explained here, mainly including paying bills in a timely manner, keeping debt as low as possible and constantly checking your credit report.

4. Set Up an Emergency Fund

Whether you have variable revenue or an unforeseen expenditure, having an emergency fund is of paramount importance. Not only can you make monthly payments on time, but also keep the business moving ahead during lean times.

The money that you keep aside is the amount that is left after all the business expenditure has been deducted. But, it’s always better to keep aside either three months or one year’s worth of expenditure in the emergency fund. In this manner, money will be there whenever you’ll need them.

5. Always Have Insurance

Personally, you might have some kind of insurance policy in place so as to keep your funds afloat in case you go through a terrible mishap. The same goes for a business as well. There are numerous business insurance policies like property insurance and employers’ liability insurance, which would help you to protect your employees as well as your business.

6. Shop Around

When looking for new furniture or new home, you won’t simply go and purchase the very first item you see, right? The first thing that you’ll do is compare its price. How about opting for a bank loan or credit card? You’ll certainly shop around for affordable interest rates well before making a decision.

It is the exact same for your business as well. Be it choosing an office space, office equipment or business credit card, you’d first compare their interest rate, price and terms and conditions in order to acquire the best possible deal.

When shopping around for interest rates, you must always search for top payment firms. Of course, you might not become a millionaire, but you could certainly save hundreds or even thousands of pounds. This money could then be put into the emergency fund or you can even use it to grow your business in a healthy manner.

Keeping up your finances takes a lot of hard work and so does growing a business. There aren’t any shortcuts to achieve that either. So, all you need to do is maintain your consistency and work your tail-off, and you will definitely be on the right track.