Close Menu
    Facebook X (Twitter) Instagram
    Finance & Loans
    • Home
    • About
    • Archives
    • Contact Us
    Finance & Loans
    Business

    How Not To Go Bankrupt When Starting A Business

    Elisa AdamsBy Elisa Adams2 July 20162 Comments3 Mins Read

    Starting your own business could be just the ticket you need to escape financial worry.

    But, equally, it could be the beginning of a financial disaster.

    Don’t just rush into your new enterprise, throwing caution to the wind.

    Think about how not to go bankrupt first – then build your business empire from there. Here’s how.

    Make Use Of Financing Loans

    Small businesses are often very naive when it comes to their financial forecasts. They add up how much they’re going to spend over the year and how much they expect to get in. And then they compare the two. If the amount they are getting in is going to be more than they spend, the business is viable. Or so they think.

    The problem here is a misunderstanding of what cash flow means in practice. While it’s true that they’re in the black at the end of the year, they might not be throughout.

    For instance, a client might make a late payment, meaning there’s no money to pay wages. Here’s where negative cash flow rears its ugly head. You have a viable business. But it’s been thrown off course because right now you’ve got more going out than is coming in.

    Taking out financing loans to improve cash flow is essential. Without good cash flow, your business will quickly die and wither away. Fortunately, these loans are easy to obtain, provided the fundamentals of your business are sound.

    Reduce Your Investment Risk Profile

    Most investors understand that their portfolio should be diversified. It’s a way to protect themselves from the vicissitudes of the market. But when it comes to starting a business, most investors throw caution to the wind. Setting up a business is risky, yet they don’t change their portfolio to reflect this. It’s as if the two aren’t related at all.

    Prudent investors will account for the new risk running their own business brings. As a result, they’ll shift their portfolio out of risky assets and into low-risk classes, like government bonds.

    Get Insured

    Insurance is perhaps one of the most important financial innovations in history. Here’s a method by which people can protect themselves from the risks of living, breathing and doing business.

    As a business owner, you’ll want to take advantage of the protection insurance brings. There are lots of different types of insurance cover business owners can grab. First off, you’ll want to protect yourself from litigation. That means taking out employers and legal liability insurance.

    If you offer any services to people, you’ll also want to take out professional indemnity insurance. This protects you if you give out bad advice that results in people getting hurt or losing money. Finally, you’ll want to take out “key man” insurance. This is used to protect your income should you, or anyone else critical to the business, fall ill.

    Accept Defeat

    Lastly, don’t get lulled into pursuing an enterprise that just isn’t going to work. Too many entrepreneurs spend years stuck in a quagmire, going round and round in circles, never making a profit. If a business idea doesn’t work there’s a simple solution: move on and try something else.

    Image Source: pixabay.com

    business empire financing loans how not to go bankrupt improve cash flow Insurance professional indemnity.legal liability protect income starting a business
    Share. Facebook Twitter Pinterest LinkedIn Reddit
    Elisa Adams
    • Website

    Passionate about personal finance, smart saving strategies, and helping others achieve financial freedom. When I'm not breaking down complex financial topics, you’ll find me exploring budgeting hacks and investment tips for everyday people.

    Related Posts

    Properly Manage Business Loan Funds for Long-Term Prosperity

    14 July 2024

    How Capital Fuels Business Growth and Ensures Long-Term Success

    18 January 2024

    Accounting Knowledge for Small Enterprises

    6 January 2024

    2 Comments

    1. Pingback: Essential UK Employee Protections That Could Save Your Finances - Finance & Loans

    2. Pingback: Financial Highs And Lows Of A Transport Company - Finance & Loans

    Leave A Reply Cancel Reply

    Recent Articles
    • How to Pay Off $10,000 Credit Card Debt Fast
    • Smart Strategies to Save for Big Purchases Without Breaking the Bank
    • Budgeting Tips for Young Parents to Thrive in Challenging Economy
    • Properly Manage Business Loan Funds for Long-Term Prosperity
    • Delayed Gratification for Future Financial Success: Benefits, Strategies & Long-Term Goals
    Loan Calculators

    Auto Loan Calculator
    Mortgage Calculator

    Facebook X (Twitter) Instagram Pinterest
    © 2025 Finance & Loans.

    Type above and press Enter to search. Press Esc to cancel.