Small business finances: Fueling success

Learn how to set up your business finances and what options exist for financing your business venture.

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Small business finance
Published: October 17, 2014
Updated: August 08, 2016

Many businesses start out with little more than a few personal credit cards. While this may be fairly typical, you should try to get your business on its own financial footing as soon as possible. 

Separating your business and personal finances makes it easier to monitor your cash flow and presents a more professional image to the world. It also helps you build a credit history in the name of the business, which is essential for future borrowing.

"Try to get your business on its own financial footing as soon as possible."

Setting up your finances

Here are some financial tools to consider for setting up your business's finances:

  • Checking. A dedicated business checking account should be the foundation of your business finances.

  • Savings. Don't overlook a business savings account, which can be a cost-effective way to prepare for planned and unexpected expenses.

  • Credit card. A designated business credit card for everyday use helps you separate business and personal expenses easily at tax time.

  • Payment processing. Offering convenient payment options with a merchant services account can help bring in more revenue and improve cash flow.

  • Online banking. Take full advantage of electronic tools for managing cash and tracking spending — including integration with popular accounting software.

Fueling your venture

How will you finance your company's launch and pay its bills? If you have the resources, tapping your personal assets is by far the easiest way. However, most new businesses must borrow money, seek outside investors, or both to meet their needs. Weigh the potential risks and rewards of each approach carefully before you put up your own capital, issue equity, or take on debt. Typical sources range from informal to institutional:

Both lenders and investors prefer entrepreneurs who've invested some of their own money in the venture. Backing your own venture sends the message that you are committed to making your business work.

Building credit

Even if you're not applying for credit soon, it's never too early to work on your credit profile. Here are some steps you can take today to begin building a strong credit profile:

  1. Open and use dedicated business accounts to set up your finances and begin tracking your history of smart spending. Make sure your personal credit record is clean by reviewing your credit report annually.

  2. Use your accounts to build up a history of sustained cash flow, steady repayments, and long-term stability.

  3. Make regular visits with a business banker so that when the time comes, your banker will know you, your business, and your industry.

  4. Learn how credit reports work, how credit scores are generated, and what considerations typically go into a lending decision, such as the 5 Cs of credit.

  5. Apply for credit before you absolutely need it. Once you secure credit, make a point of using it when needed and repaying it promptly.

Once you know how much funding your business needs, take steps to acquire it. Identify the funding sources you will pursue, and talk with your banker about ways to build business credit. Making these plans early on means you'll have ample time to build the foundation you need.

Learn more about unique funding options, so you'll be prepared when you need it.