A guest post by Beth Katz, contributing writer at Credit.com.

Every business owner wants their company to succeed and their brand to soar high. But in order to grow and become self-sufficient, it usually takes some additional financial capital. Many business owners may find themselves tempted to commingle their personal and business accounts so that they can access more money – but this is a dangerous path to follow. Keeping your individual and your company finances separate will not only make tax and reporting requirements easier to fulfill, it will also guard against the possibility of any potential business mishaps leading to personal insolvency.

Here are several steps you can take to increase the capital you have available without putting yourself at too much risk.

Looking for a Loan? Proceed with Caution

If you’re thinking about getting financing from an institution, it’s best to proceed slowly and explore all your options before committing. The Small Business Administration offers loans that may be superior to what traditional lenders can provide. Your local credit union may be able to deliver a tailored package and friendly service that puts others to shame. Be wary of business loans that require personal guarantees because this torpedoes the entire purpose of separating your own money from your enterprise’s money in the first place. Any loan you accept will have an ongoing impact on your company’s finances, which is why it pays to do your homework first.  

Consider Incorporation

Many entrepreneurs start up their organizations as sole proprietorships because this is the easiest way to begin, and the initial paperwork comes as a breeze. But as begin to grow your company, it will become more appropriate to incorporate at some point. This will enable you to better keep your work-related and private accounts apart, and it may also confer tax benefits. It might cost a little bit to consult with your lawyer and accountant to set up an S Corp., C Corp., or LLC, but the long-term advantages make it a worthwhile investment in the future of your firm. Let’s say that you want to know how to start an LLC in California, you can expect full guidance as well as a smoother registration process if you tap professional LLC formation services.

Deploy Business Lines of Credit

Lines of credit allow you to more flexibly manage your obligations and smooth out the variance involved in your weekly or monthly bills. They also serve as a way to build up your business credit history, which will help you in many ways, like allowing you to secure financing at lower rates of interest. Of course, this will only work if you actually pay what you owe in a timely way. Otherwise, your business credit score could actually become worse in addition to your personal credit score if you do not separate the two. Some lines of credit can be called in by the bank at any time for immediate repayment, so don’t go overboard by relying on them too heavily and make sure you have the right startup business credit card.

Use Your Financial Roadmap  

If you don’t know where you’re going and how, you’ll never arrive at your destination. With a well-designed business plan, you can anticipate likely problems and how to deal with them in advance. You won’t have to improvise as much and will be able to think things through beforehand. Similarly, with an accurate budget, you won’t find yourself caught short and having to scramble to meet your expenses. Break your budget down into fixed costs, which you cannot realistically change, and variable costs, which offer opportunities for savings so long as you review your situation regularly.

Keep an Eye on Cash Flow

Even if your overall prospects appear sunny, it’s critical that you attend to the details of day-to-day cash flow. An inability to meet your regular expenses could scupper your enterprise before it has even really gotten off the ground. In a poll a few years ago, 29 percent of failed startup founders cited inadequate cash reserves as a reason for the demise of their businesses, highlighting the importance of this factor in eventual success.

Create an Emergency Fund

Even if you prepare a reasonable budget and make thorough plans, like we recommend above, unforeseen events could mean trouble. If you’re spending just as much as you’re taking in, you’re leaving yourself very little margin for error. You can divert a preset percentage of revenues toward an emergency fund that will give you some breathing space when the unexpected occurs. If necessary, cut back on your salary and devote this money to your fund. This may sting a little bit in the short run, but it’s much better than having to put emergency expenses on a high-interest credit card.

Choose Cost-Effective Marketing

There’s no need to go all out with expensive advertising packages, especially if your company is still on the smaller side. Start off with the basics. Your website might well be the first contact a prospective client has with your organization, so take the time to make it attractive and informative. Email marketing is a tried-and-true method of customer acquisition, and a 2016 report from the Direct Marketing Association found that it has a return on investment of 122 percent. Social media and paid search are a couple of other worthwhile marketing avenues to explore. You can implement all of these strategies with simple, inexpensive tools.

Small businesses have it tough – ensure that yours defeats the odds by taking the initiative and precautions necessary to secure both your personal and business finances.\


About the Author

Beth Kotz is a contributing writer to Credit.com. She specializes in covering financial advice for female entrepreneurs, college students and recent graduates. She earned a BA in Communications and Media from DePaul University in Chicago, Illinois, where she continues to live and work.