Getting a commercial loan has its uses – obtaining real estate, updating facilities or expanding existing holdings – a little extra money can help give a small business the flexibility it needs to move more aggressively in an unsure market. Too much credit can be a big stumbling block, though, and organizations need to be mindful of this before finance turns into more of a juggling act than a balance.
Do more with less
If you're in a situation where your business banking feels out of control, getting more money fast may be the first thing that comes to mind, but finding smart ways to do that is key. Cutting expenses for items you don't really need should be the first step, so evaluate your spending and talk to a financial adviser to see if you have any refinancing options on outstanding accounts. Look for lower-price options for services you have and need, instead of assuming you can't pay any less for water, power, internet or other basic utilities. Travel less or invest in fuel-efficient vehicles, public transit and carpools.
Entrepreneur Magazine suggests that if you have to spend on a big-ticket item, make a solid plan before you buy to pay it back so you know how long it's likely to take. That way you can search out a credit option that will wind up costing the least amount in the long run.
Keep fewer accounts
If you have to open an account, be sure not to make a habit of doing so. Pay down balances as quickly as possible to avoid higher interest rates and don't pay one amount with another card. Inc Magazine wrote that the National Federation of Independent Businesses surveyed small business owners and found roughly 80 percent of all respondents had more than one credit card for regular expenses. This pattern can be dangerous to a company's financial plan, as it suggests revenue isn't regular or great enough to offset monthly expenses.
Part of the problem is that card issuers aren't being transparent about rates and terms, but if card holders aren't spending responsibly or continually make poor financial decisions, they are the ones who wind up suffering in the end. Though the economic crisis is finally leveling out, until the market is back on track, businesses should remain conservative with spending policies to stay afloat.