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The Biggest Financial Threats to Your Startup 

 July 15, 2020

By  Matthew King

Starting up a business can be incredibly exciting. It can also be incredibly nerve-wracking because of all the risks involved. One of the biggest risks is financial threats. Financial threats are especially worrisome as they can come from multiple fronts, making it incredibly difficult to face, especially all at once. Here are three of the biggest financial threats to be aware of when starting your business.

Debt

One of the biggest threats to your business is debt. Sometimes you have to go into debt to provide the funds for your startup, but if you don’t have the means to pay off your debt, or your business struggles soon after launch, you’ll find that you owe the bank more money than you can payback. Your business will no longer be making a profit, and you might end up having to declare bankruptcy.

To avoid going into debt to start your business, consider assets you already have. Consider searching for investors or moving your business online instead of doing business in a building, as it is cheaper to maintain an online business than one that requires a building. You don’t have to go into debt to start your business.

Personal Liabilities

Your business might also be under threat from personal liability. An LLC or an S corp can provide protection against personal liability. An S corp provides better protection but requires extra steps to register. An LLC can be expensive to maintain. But it is important to have a structure for your business put in place just in case something goes wrong and your liabilities become too much.

Not Enough Investors

If your business doesn’t have enough investors, your business could be threatened, and you might become bankrupt. To maintain a startup, you need funds, which you could go into debt for, as mentioned above, but too much debt can make it impossible for your business to make a profit. If you don’t have the finances to start or maintain your startup, your startup won’t survive, and you will have to change your plans. To avoid this, seek for more investors and avoid taking unnecessary risks.

Nothing worth doing comes without at least some sort of risk. However, you can mitigate that risk for your business. Money can be difficult to manage, but if you avoid these threats, and protect yourself, you’ll have a better chance of success.

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