Thread by @SlwaneToYou

Entrepreneurs can be considered high risk credit for long term debt because of the volatility associated with business income.

This can make obtaining a ‘bond’ difficult.

Here’s a few tips:

- separate yourself from your business
- keep accurate accounts
- save for a deposit

Most entrepreneurs make the mistake of treating their business finances like their personal finances - DON’T.
Determine a salary and pay this into a separate personal account each month.

Ensure that the salary is enough to sustain your monthly needs and be consistent each month for a period of at least 12 months no matter the ebbs and flows of the business.

Clearly mark the payments to your separate personal account as a ‘salary’. This creates a visible track record for anyone analysing your financials.
Pay for all your personal expenses from your personal account and keep your business affairs separate.

If the business makes additional income (PPE or vaccine windfall 🤷🏿‍♂️) which you would like to pay out to yourself. Don’t increase your salary, declare a dividend.

If you need to put money back in the business, clearly mark it as either ‘capital contribution’ or ‘shareholder loan’. Keep written records of this. It will help both you and your business.

Keep good and accurate details on your personal account. Allocate money to payments clearly so it’s easy to see what comes in a goes out. Try to retain a positive balance.

Save up for a deposit from your personal account. Again clearly mark the saving as ‘house deposit’. Also save up for costs and mark this clearly.

Banks like low determinable risk. They want to know that any loans extended will be repaid in full.
The best way to check this is by looking at your historical financial behaviour. This is not easy for most entrepreneurs as business can be very volatile and cyclical.

Separating your business and personal balance sheets could also be good for your business in helping you retain some cash in it by having a definite salary opposed to stripping everything out each month. Yes, this is an extreme example but it does happen. Sibuya khona.