Entrepreneurs are so busy working on their business rather than in their
business, as they should be, that sometimes your friendly neighborhood banker
can end up robbing you blind! The following are 4 common banking mistakes made
by busy small business owners.
Only Banking at 1 Bank - As a small business owner with 100 things to do, it is
easy to settle in with one bank and do all of your banking activity through that
one institution. This can have a number of ill side effects. When it comes time
for a loan and your bank denies you, if you don't have a relationship with
another bank you may be out of luck. Secondly, you should make banks compete for
your business. Don't simply give all of your business to one bank by default.
Shop around for the best deals.
Failing to Focus on Collateral in Loan Application - When you are submitting a
loan application you may be asked for an executive summary. Make sure that your
executive summary focuses on why you are a good risk for the bank. Don't talk
about your exponential growth or potential. Bankers want to know about the facts
of your financial situation. Your assets, liabilities, and what you can offer as
collateral.
Relying Too Much on Line of Credit - If you run your business on a line of
credit, as many entrepreneurs do, you may be setting yourself up for disaster if
your bank decides to reduce or eliminate your credit line. This can actually
happen and has happened to many small business owners during the current
recession. Try to wean yourself off your line of credit if at all possible.
Carelessness with Bank Fees - Small business owners remember, cash is king. You
must avoid bank fees at all costs. What a careless way to let your money
literally vanish into thin air. Don't get too lax with your banking, even during
those busy weeks and months, because when you look back at your bank fees you
will realize what a hindrance they can become to your business if they are a
recurring issue.
Don't fall victim to these 4 common banking mistakes. This may mean you need to
hire a part-time bookkeeper or a CPA, but in the words of the E-trade commercial
baby, avoiding these 4 mistakes can "Save you a pantload".
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