Entrepreneurs get excited that they can “borrow” from themselves and not go to the bank. However, afterward they don’t treat themselves like a bank. Here are a couple of basic tips that will allow you to avoid commingling funds and stop unexpectedly taking from or hurting your personal finances.
Always pay the personal loan back that you took out for your business. We’ve already discussed that Entrepreneurs borrow for their businesses from their personal money. They tend to forget to pay themselves back or not worry about the personal cost of the business debt owed. Be sure to treat the personal money as a loan that you have to pay back. This is important because it will seem like you are making money on the business side, but your personal money starts to take a hit. When you take money from your personal funds, create a promissory note of when you will back it back and if it will have interest. This way you will make sure you are paying the money back that you borrowed and you aren’t commingling funds. It will also give you a clear view of if the business is really making money. If you went to the bank, you would have to pay them back so treat yourself the same.
Start building a business fund. To avoid taking loans from your personal money for your business. Create business capital by building a business fund. When you began to earn revenue in your business, make sure that you are saving that money for future business expenses. For example, it took an investment of $300 in your business to make $700 in revenue, then go head and put at least the $300 needed to reinvest into that opportunity into your business account. If you can add more than just the $300, then do so. You should set a money goal for each time you host an event, make money from services, get contracts, etc… That goal should be to put the amount needed for your expenses and more back into your business amount. Doing so allows you to build up enough money in your business account to fund more money making opportunities.
These two tips will have a huge impact when it comes to not only making money in your business, but also allow you to increase the money available to grow your business.
Let’s work smart and not hard to grow your funds strategically; it is one of the first steps to building wealth.
Download your Loan Repayment Chart HERE!