Don't let financial ghosts haunt you

October brings all sorts of spooky ghosts and goblins–but unlike the ones that trick-or-treat at your door on Halloween night (at least in non-pandemic times), ghosts of financial mistakes can haunt you for a long time to come. The best way to avoid that is to not make those mistakes in the first place–and I’ll share more on how to do that. But, for many reasons, you may have already made some of these mistakes. I’ll share what you can do now to help make those spirits a thing of the past.

Here are three common financial mistakes that can come back to haunt you:

1. Taking too little money.

While being conservative can be good, it can also leave you without the funds you need to grow and succeed. When asking for money, think about what you truly need to fuel growth, support additional hires, bridge seasonal downturns, expand into new markets, add product lines, fund marketing programs or whatever is in your business plan. Don’t be so cautious that you end up lacking the working capital you need.

2. Taking too much money.

On the flip side, what could be bad about having a lot of cash on hand? It’s tempting to take as much money as a lender will give you but borrowing more than you can afford could equal higher payments–and more interest–than you can pay and negatively impact your credit. You are better off taking just what you need and paying it off to establish credit. You don’t want to pay interest and fees on money you don’t need in the immediate future. 

If you find yourself in either of these situations–if you already took more or less than you need–what can you do? Go back to your lender and share your concerns. Ideally, you have established trust and have a good working relationship. Better to be honest now and work together on a plan than fail to grow or continue to deplete your cash reserves paying off your loan, while getting behind on payments.

3. Getting behind on payments.

Speaking of payments: We all know that getting behind on payments is something you want to avoid. It’s a stressful situation that can snowball quickly into an unmanageable one. Penalties and fees can start adding up, making it even harder to pay your next payment and get back on track. It can also negatively impact your credit and your ability to obtain funding in the future. It’s critical to understand your business and finances before you take a loan or financing to ensure you can pay it back promptly.

If you find yourself in a situation where you think you might have trouble making a loan payment, it’s best to contact your finance partner ahead of time. But even if you’ve already missed a payment–reach out. Most partners will work with you to set up a repayment plan that works for you and help you get back on track.

Companies have many responsibilities including getting projections, budgeting and financing right, which can be tough. Just look at all the companies that were on track, and then the pandemic hit with supply chain issues, labor shortages and changes in buying habits. There will always be changes and issues, but the best things you can do are have a solid understanding of your company’s finances and plans as well as a trusted lender with an open line of communication. Then, the only ghosts visiting you will be the cute ones asking for a treat.