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Entrepreneurs: are your projections on target?

You likely already know this, but it bears repeating: if you’re starting a new business venture, you should absolutely expect a few bumps along the way. The most pressing concern for an entrepreneur usually comes down to cash flow. Wouldn’t it be nice if the liquidity needed to get a startup off the ground would flow as reliably as the Old Faithful Geyser at Yellowstone National Park? Don’t we all wish!

In reality, cash flow is anything but reliable — particularly in that first year. No matter how many pro forma statements you tabulate, sometimes the figures add up with a minus sign. That’s when you may turn to credit cards to provide the operating cash you need.

Now here’s the rub. Paying off credit card interest seems like a doable strategy, but what if your sales projections are off by 20 percent? You could be paying 20 percent interest or even more on a balance that can quickly balloon out of control. While paying a little more for quick startup cash is not a bad idea, a better option is to look for a solution where the interest rate is better than average.

The best way to avoid paying higher fees for quick-turnaround loans is to ensure your projections are on target. Most U.S. communities offer startup advice and help for aspiring entrepreneurs. Some nonprofit economic development organizations can help an entrepreneur estimate exactly how much cash should be on hand before you open your new business.

And here’s another thing to consider: If you need a small loan approved on a quick turnaround, make sure the company offers acceptable customer service. Ask about the lender’s service. Is it above par? It is responsive? Are all your questions fully answered? It’s those questions that demonstrate how one lender stands above another.

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