I used to be terrified of credit. The idea of racking up debt, drowning in interest, and becoming a slave to minimum payments was enough to send shivers down my spine. I’d see those sleek, shiny cards and imagine them as ticking time bombs. Loans? Don’t even get me started. They felt like a one-way ticket to financial ruin.
It's funny how fear can paralyze you. For years, I let my anxiety about credit and loans dictate my financial life. I missed out on business opportunities, denied myself necessities, and lived in constant stress. But enough was enough. I decided if I really wanted to grow the business of my dreams, I'd have to face my fears head-on.
I'm so glad I did.
What I discovered on the other side of fear was a world of financial possibilities. With the right knowledge and strategies, credit cards and loans can be powerful tools, not terrifying weapons.
In this blog, I’ll share my personal journey and the six biggest funding fears that held me back. PLUS, how I conquered them all. Let's dive in to some of the fears I had and how to break free from funding fear.
1. Financial Pressure
This, without a doubt, was my biggest fear. As a single mom of two, who was desperately trying to get my startup off the ground, it was really scary navigating the complexity of managing my personal and business finances. It was especially hard because I was using my personal credit to fund my business, and landed in $31,804.21 of credit card as a result.
Credit card repayments can be a significant financial burden, especially if the business experiences cash flow issues. Because I was a new business, I didn't understand the ebbs and flows yet. The slow periods and busy seasons. While I was figuring that all out, I had to use my personal credit to pay for personal expenses and get what I needed for my business. And at the same time, try my best not to miss payments which can lead to penalties, damaged credit scores, and even potential business closure -- something I definitely didn't want to deal with.
How I beat it:
- Developed a business plan: This included my financial projections which helped me to assess the impact debt was having on the growth of my business. Once I finished, I realized, debt wasn't the problem because I strategically used it to grow. I just NEEDED to get the debt out of my personal name and into the business ASAP.
- Multiple Funding Options: After diving more into the credit works, I soon realized there were various funding sources. I needed financial flexibility, and didn't want to rely on only one source of funding. I wanted easy approvals, low rates, short-term and long-term options.
- Financial Management: The first step in fighting fear is facing it head on. I implemented financial management systems to monitor cash flow and profitability so I could understand where my money is coming and going.
2. Personal Liability
One of the benefits of having a business, is the ability to separate your personal and business finances with an LLC or Corporation. However, when it comes to most business credit cards and bank loans, lenders often require personal guarantees, meaning the owner is personally responsible for repaying the loan if the business defaults. This exposes the owner's personal assets (home, savings, etc.) to significant risk.
Truth is, I was terrified of losing my home should my business crumble under the pressure of growing debt payments.
In some cases, lenders may hold the owner personally liable for business failures, particularly if fraud or mismanagement is involved. This can lead to financial ruin and even legal battles, and setting back my kids futures.
How I beat it:
Business Lawyer Guidance: Forming an LLC to protect personal assets, and speaking with a business lawyer helped me realize that my home wouldn't be taken from me should my business flop due to debt payments.
Insurance: Purchasing appropriate liability insurance to mitigate risks helped me feel more stable and protected.
Careful Contract Review: Scrutinizing every loan and credit card agreement for personal liability clauses helped me develop the understanding I needed to reduce the risk of losing everything I worked hard for.
3. Lack of Understanding
Credit card and loan agreements are usually filled with jargon and complex financial concepts that can be overwhelming for most people. This leads to misunderstandings, and misunderstandings can lead to costly mistakes.
My biggest mistake made early in funding my business was taking on funding with high interest and weekly payback terms. Although, I was able to pay it back on time, I strained my business cashflow during slow winter periods and caused myself unnecessary stress.
Truth is, the funding landscape is vast, with options like venture capital, angel investors, crowdfunding, merchant cash advances, SBA loans, vendor credit, business lines of credit, and government grants (just to name a few) -- Navigating these options without proper knowledge can lead to choosing an unsuitable funding source for your business's needs like I did.
How I beat it:
Financial Education: Invest time in understanding financial terms and concepts. It helps to understand how interest rates, factor rates, and fees work on business lending products.
Seek Professional Advice: Consult with accountants, lawyers, consultants, and financial experts. This way, you can avoid costly mistakes and wasting time (that you'll never get back).
4. Business Failure
Let's be real. Nobody get's into business to fail. Business failure can have devastating consequences for the owner, including personal bankruptcy, loss of assets, and damaged credit. I was scared that a failed business would negatively impact my personal and professional reputation, making it difficult to secure future funding and secure investors.
How I beat it:
Risk Mitigation: Develop backup plans to address potential setbacks that could happen.
Revenue Diversification: I increased and stabilized my income by diversifying my revenue streams.
Crisis Management: I developed a crisis management plan to respond to any challenges for quick resolutions.
5. Opportunity Cost
The funding process is time-consuming and resource-intensive, which can be REALLY distracting -- diverting attention and energy from core business operations. The demands of lenders consumed me, which made it hard to focus on my business goals, hindering growth and innovation.
Be careful with this one...
Growing and scaling a business requires a ton of focus. Having one bad month because you're stressed out about supplying documents, pulling reports, and getting qualified for funding is not good for your bottom line.
How I beat it:
Prioritization: Focus on essential tasks and delegate non-critical activities. Pulling reports, bank statements, etc. can be handled by your assistant or bookkeeper.
Time Management: Implement effective time management strategies so not to waste too much time on the trying to fund your business.
6. Fear of the Unknown
The impact of funding on a business can be really unpredictable, and any business owner may worry about the potential consequences. After COVID, I soon realized that external factors, such as economic downturns, hyperinflation, and changes in interest rates, would significantly impact the business's success and profits. Not being able to control it made me feel powerless.
How I beat it:
Research and Analysis: I realized economic downturns effect everyone! From my customers, vendors, sponsors, team members, etc. So, I conducted thorough market research and industry analysis to see how the downturns were effecting the people I work with so I could best prepare.
Mentorship: Seeking guidance from experienced entrepreneurs was a lifesaver for me. It helped me learn new strategies, and gain insights from people going through some of the same struggles as me. Not only did it make me feel validated, but it also made me feel I could overcome it.
Get Informed and Thrive
Overall, understanding these fears helped me better assess the risks and rewards of accepting funding and make informed decisions. I should warn you that overcoming these fears wasn't an overnight process. In fact, I still deal with them today!
The difference is, I still actively look for funding opportunities despite the fear and discomfort.
At first, I didn't believe I deserved it, so I blocked my blessings of securing my first $20,000 business credit card early on in my business credit journey.
But, it was worth the time, money, and frustration figuring it all out. Because once I got my first business credit card and learned how to be a good steward of it, I was able to get even more!
The more I learned and practiced, the better I became -- giving my business the chance to thrive!
What about you?
Do you have anxiety around growing your business using business credit? We get it. The decision to accept funding for a small business is a significant one.The good news? You don't have to go at it alone.
You can learn how to get business credit the fast, easy way in our Flyy Credit University. Get the credit you deserve by getting the resources, community, and support to have success.
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