If you are starting your own business, there are times when the capital you have is not sufficient to develop your business, so you need additional funds as business capital. One alternative that can be taken in obtaining business capital is to apply for a loan with collateral or without collateral.
In reality, with the many conveniences in obtaining loans from debtors, sometimes it is not followed by how to manage business finances correctly. On this occasion, the BFI Finance team provides tips on how to use and manage loan funds carefully so that your business can be successful, while also avoiding losses due to not being careful in managing loan funds. Check out the following tips for managing loan funds.
9 Ways to Manage Business Finance a la BFI Finance
1. Making a Mature Financial and Business Plan
Before you decide to apply for a loan online or conventionally, you must plan your finances carefully. What do you need to grow your business so you can have an idea of how much additional funding you need?
Also, take into account the income and expenses you get per month. Is it enough to pay off the loan? With careful business planning, you can find out which loan funds are needed and can borrow according to your ability to pay while keeping your finances stable.
2. Paying Attention to the Ratio of Loans to Income
In applying for a loan, you must also pay attention to the ratio of the loan to your income or known as the debt service ratio. Ideally, the debt or loan ratio should not be more than 30% to keep your finances healthy and avoid the risk of bad credit. In addition, it also shows your ability to pay and affects your credit score.
3. Recording Cash Flows Regularly
Make notes about your business cash flow or cash flow on a regular basis. The business records include total borrowed funds, loan invoices, and monthly profits and expenses. By making neat bookkeeping, you can calculate the budget that you feel should be reduced or added so that existing funds can be allocated more effectively.
In addition, this is also useful for avoiding the risk of bad credit or fines for being late in paying installments. You can find out the remaining loan funds, the loan tenor, and how much must be allocated per month to pay the installments.
4. Separate Business and Personal Funds
One of the most important pieces of advice in running a business is to separate business and personal funds. This is to find out whether you are making a profit or loss, to make it easier for you to make financial reports, and not to interfere with your cash flow. That way, you can see if your loan funds have been used effectively so that they can be allocated more optimally.
5. Pay Attention to the Assets, Debts, and Receivables You Have
The following ways to manage business finances should not go unnoticed. Know carefully which assets, payables, and receivables. For example, don't use new debt to pay off old debt. Make a list or inventory of the assets you have starting from the smallest to the largest assets. Also, pay attention to whether there are depreciation and maintenance costs of your business assets that cause the selling value of your assets to decline in the market. In addition, is it necessary to pledge assets back for the purposes of your business development? By knowing the assets, debts, and receivables that you have, your business continuity will be smoother.
6. Pay All Bills On Time
If your business has payments per term, for example, every 2 weeks to suppliers, then always try to pay on time. The advantage of paying trade payables on time will certainly maintain good relations with suppliers and maintain healthy financial cash flow.
Similarly, if you have business capital loan installments to financial institutions such as banks and finance companies, make payments before the due date each month. In addition to avoiding fines, paying trade debts on time will keep your credit score good. In essence, if you involve an external party who supports the development of your business and requires payment, always make payments on time.
7. Use Profit to Grow Your Business
The next way to manage business finances is to take advantage of the profits you get to develop a bigger business. The purpose of establishing a business is to make a profit or profit. Unfortunately, not all types of businesses are sure to make a profit. Some take years to make a profit, some businesses take a year to make a profit. It all depends on how to manage the business properly.
Well, the use of this profit can be used for the personal needs of business owners or for business development purposes. Developing a business here can be used for example to increase the number of outlets, increase the number of employees, or add different types of products and services. It's good if your business has made a profit, allocate more to growing the business than for personal purposes. If the business's financial condition has stabilized, you can use a larger proportion of operating profits for personal purposes.
8. Pay Attention to Contracts With Third Parties
Running a business, of course, involves many parties, including those who can benefit from the business process. If you collaborate with a third party, make sure you make a clear and legally regulated agreement. The goal is none other than to anticipate events that are not cool. Some points that can be considered in the contents of the agreement are profit sharing between the two parties, payment period, and others.
9. Consultation with Mentor
Consulting on how to manage business finances with a mentor or someone with more experience is highly recommended. You can consult about how to save on operational costs, for example, or in determining product prices. If you haven't found the right mentor figure to guide you in doing business, you can join a community or seminar on entrepreneurship where there are many experienced practitioners there and use it as a means of expanding networking.
Those are some tips that you use on how to manage business finances obtained from loans. If you know how to manage business finances properly, of course, a business capital loan can be an alternative in expediting your business processes. Make sure you apply for a business capital loan with the lowest interest and guaranteed credibility.
Hopefully, the tips above can help you in utilizing loan funds for business capital! Information and conditions related to loan applications through BFI Finance can be accessed at the link below.
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