OPINION: For many small business owners, the line between business and personal can often become blurred. The uncertainty of the last 18 months hasn’t helped, as many scramble to juggle everything from the new traffic light system, staffing and balancing the books, to making time for family and friends, all in the lead up to the holiday season. Even more so if you’re in Auckland, where I am, as serious lockdown fatigue is likely to have set in weeks ago.
As restricted trading continues to add pressure on businesses, it’s also all too common for personal funds to be used to support or grow operations – whether it’s to invest in new technologies, expand premises or to manage cashflow. But personal finance is called personal for a reason. Using it for any other purpose may do more harm than good – to both your personal life and business.
According to RFi research commissioned by Prospa earlier this year, one in four Kiwi SMEs need access to more credit or lending than what’s currently available to them.
If you’re a small business owner considering how to finance your operations, here are four reasons why you might explore business funding options instead of dipping into your personal savings.
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Separating finances may save precious resources
Having a clear differentiation within your bank accounts, receipts and other documents can help you prepare for the next tax season.
If you aren’t strict with the way you access and spend money, it may waste a lot of your time (and increase fees if you’re using an accountant) to sort through everything. If you end up being audited by the IRD, that can add another layer of complexity to the process.
Using business finance also allows you to claim interest as a tax deduction. No matter what finance you pursue, there will likely be interest charges, so you might as well claim on them if you can!