5 Tips to Help Avoid Common Financial Mistakes in Business
*This post is from CMB partner Essex Lease. Visit them for flexible lending solutions.
“The only real mistake is the one from which we learn nothing.” – Henry Ford
There is no road map when it comes to owning a business. It’s a process of trial and error; you will make mistakes along the way. And some of the most challenging mistakes can come from your financing decisions. If you’ve made mistakes in the past, you’re not alone. What matters most is how you respond.
At Essex Lease Financial, we believe that no matter what your business is facing, you do have options if you work with an experienced financial partner committed to your success.
Here are 5 commons mistakes we’ve seen our customers make and how we help solve them.
Carrying Debt on Credit Cards
We know our customers are always looking to negotiate the best interest rate possible for their lending and financing needs, which makes sense.
But if you’re worried about interest rates while carrying a balance on your credit card, that makes a lot less sense.
Credit card debt is among the most expensive debt you can carry. Collecting perks and points from your credit card company is hardly worth it when you consider that you will pay them upwards of 22% interest.
When we see businesses carrying balances of thousands or even hundreds of thousands of dollars on their credit card, we always recommend a plan to consolidate their debt in a manner tailored to their cash flow and business cycles – and at a vastly lower interest rate. Missing a minimum payment on a card carrying that kind of balance can have serious cash flow consequences for your company.
Being Reactive Instead of Proactive
Too many business owners make the mistake of avoiding a financial problem until it’s out of control. And we get it; big banks are incredibly risk-averse, so it makes sense that you wouldn’t feel comfortable coming forward with a problem.
However, responding proactively to a potential issue before it gets out of hand is crucial to reducing the negative impacts. When we’re proactive rather than reactive, businesses have far more options available and make better business decisions.
That’s why we place so much emphasis on building relationships with our customers. We need you to trust us enough to feel comfortable coming forward if there is a problem. Keep in mind that we succeed when you succeed, so helping you stay proactive is mission-critical for us.
Not Honestly Evaluating Business Relationships
Your business can only be as successful as the people you surround yourself with, and that includes your customers and your financial partners.
If you’re taking on contracts that aren’t truly profitable, accepting debt payment terms you can’t actually service, or working with a lending partner you can’t trust to be there for you in good times and bad ones, it may be time to re-think where you’re investing your time and money.
That’s why we always offer our customers an honest view of their business using straightforward calculations to help them understand what’s serving their bottom line – and what isn’t. It’s a refreshingly different approach than you’ll find at a bank.
Not Planning for the Lifespan of an Asset
There are a few things you can count on in life; death, taxes, and equipment breaking down. Acquiring new equipment is rewarding, but if you don’t have a contingency plan for what you will do if that equipment needs repair, you can quickly find yourself having to divert working capital away from other business priorities.
That’s why we always tailor our customer’s financing plans to their cash flow and business cycles, with room for contingency in the event of surprises.
Not Diversifying Lending Relationships
Utilizing one financial partner for all of your lending and financing needs is risky business. Particularly if your industry is seasonal in nature or vulnerable to economic turbulence, it’s important to have multiple options for maintaining your working capital. Traditional covenant based lending institutions (i.e. banks) are good at the day-to-day transactions, but tying all of your borrowing with the bank is risky if they get spooked.
That’s why we’ve seen so many customers choose to work with us over a traditional bank. Our solutions are as flexible and diverse as your business needs.
We’re Essex Lease Financial, and we’re refreshingly different from a bank. Why? Because we’re a personalized, flexible financing partner that understands your business needs are never one-size-fits-all.
For more than 35 years, we’ve been helping business owners in Canada access working capital, finance equipment, restructure debt, and plan for growth.
Get in touch with us today to learn more or get started.