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The Importance of a Sound Financing Strategy

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When you ask people what their biggest problem is when it comes to starting a business, the answer usually is getting the money to start the actual business. Some people save up but if you had the money, you would not need to get a business started in the first place. Sometimes, family can help and that can be done through personal loans but it can get complicated mixing business with your personal life.

Financing strategy is the process of planning the acquisition and management of capital for business. This includes finding the loan and repaying it during the course of the loan period.

Proper financing strategy is used to accomplish three things. First, it is used to create the financing needed to support both present and future cash flow. Then it is used to determine the debt repayment schedule that still allows a positive cash flow for the business. Finally, it addresses all possible conditions that will require additional financing for your business.

A strategy in place for your financing is necessary because it gives you structure as to how you will deal with the additional working capital. However, to create an effective strategy, one must first get the information to plan accordingly and there are several ways we can do this.

First, if your business already exists you need to know how much you spend to keep it running. You get this information through proper bookkeeping. You also need to think about proper planning of your future expenses. To finance the business, a business person must have a good grasp of both your past, present and future.

Second, financing strategy keeps you safe from over-extending credit, which in turn causes you to keep your business credit safe. Abusing your credit could cause your business credit to take a hit.

These are just some of the things you need to know about financing. Capital is the energy you need to start a business and without this energy you will be left without any of the vital resources you need. So, plan well and follow this plan to the letter and your business will be set.

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About the Author

Rhonda Evans

Rhonda is the founder and editor of MoneyPoint Live. She is a retired Senior Chief from the USN, mother of two, previous small business owner, and entrepreneur.

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