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New Year’s resolutions for small business owners

ARORARohit123010_optBY ROHIT ARORA

Whether you have had enough of your current job and are looking to be in charge of your own destiny or are already in business and looking to expand, securing capital is vital to starting up and growing small business ventures in New Jersey.

The passage of the Small Business Jobs Act created a $30 billion lending pool that entrepreneurs can tap into, but that does not mean that getting a business loan is easy. Borrowers still need to be vigilant about their financial record-keeping both professionally and personally, since personal credit history does play a role in the loan application process for most banks and non-bank lenders.

Below are Five Financial New Year's Resolutions for small business owners, as well as those seeking to start their own companies.

1. Improve your personal credit scores

Personal credit scores impact business owners seeking capital. If you are looking to secure financing in 2011, it is important to know that lenders can access your personal credit history from companies such as Equifax and Dun and Bradstreet (D&B). And they make lending decisions based on a combination of both personal and business credit history. So if you have a lot of credit card debt, pay it down — perhaps at a more attractive rate if you can secure capital. If you have a vendor nagging you for invoices past due 90 or 120 days, pay him as soon as possible to get the blemish off your record.

2. Keep better financial records

Having sound financial records is not only good practice, it is also crucial if you want to look for business expansion funding in 2011. Sales revenues, tax statements and other proof of the soundness of your business are necessary to become more attractive to potential lenders. Financial institutions will base their decisions on such data. The records also help you forecast what you think your firm's position will be out into the future. In Biz2Credit's online platform that matches small business borrowers and lenders, data from D&B is incorporated into the system for potential funders to see. It is important to have accurate records to help lenders make decisions in your favor.

3. Pay your estimated quarterly taxes; don't procrastinate on annual returns

Getting hit with a large bill on April 15 can be a hardship for many small businesses and obviously puts a dent into cash on hand for business operations. Paying estimated taxes quarterly and having your year-end returns prepared well in advance of Tax Day can help small business owners prepare if they wind up owing money to Uncle Sam or Governor Christie. They can then search funding options to bridge through the tough times. So resolve to start early and give yourself time to prepare in case you owe money to the IRS or the State of New Jersey. If doing it yourself is too challenging, contact a professional tax planner who specializes in small business.

4. Cut your cost of capital

You may be paying too much for your working capital. Banks and other lenders from whom you have borrowed may be charging lower interest rates now. You can either refinance with your current lender or shop around for one who will give you a lower rate. There are many institutions — ranging from big banks to credit unions to micro lenders that specialize in making loans to minority-owned firms and companies in disadvantaged areas — that are making it a priority to provide capital to small businesses.

5. Look into the future

Review your financial statements each quarter and try to forecast the future revenues and expenses. The only way to accurately forecast how your business if going is to analyze your financial documents for each accounting period. There are resources available for you to examine trends in your industry and how your business compares with other companies in the same industry. Then you can make changes to get your firm back on track if there are any issues that need to be addressed.

Small businesses are the engine driving the economy and job growth. In order for new ventures to become successful — and for existing ones to grow — they need capital. Thus, it is important to get your finances in order and secure adequate financing. Quit procrastinating. Lose bad debt. Resolve to improve your financial practices in 2011. You might just find it will make for a happier and more successful New Year.

Rohit Arora, an expert on small business lending, is co-founder and CEO of Biz2Credit (www.biz2credit.com), which connects small business owners with 150+ lenders and service providers via its safe online platform. KPMG ranked Biz2Credit among the top 100 emerging companies in 2008.

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