You want funding.
You have financial mistakes.
You need to fix them.
You need solutions.
Financial foundation mistakes. Red flags. Fixes. Your solutions.
This guide shows you how.
Mistake identification. Problem solutions. Fix implementation. Your improvement.
Read this. Identify mistakes. Fix problems.
Key Takeaways
- Mistake 1: Negative working capital—fix by improving collections, reducing payables, or increasing cash reserves
- Mistake 2: Low current ratio—fix by increasing current assets, reducing current liabilities, or both
- Mistake 3: High debt-to-equity—fix by paying down debt, increasing equity, or both
- Mistake 4: Low DSCR—fix by increasing operating income, reducing debt service, or both
- Mistake 5: Negative profit margins—fix by increasing prices, reducing costs, or improving efficiency
Table of Contents
Why Mistakes Matter
Mistakes scare off funders.
What happens with mistakes:
- Loan applications are rejected
- Investors walk away
- Funding is not secured
- Growth is constrained
What happens without mistakes:
- Loan applications are approved
- Investors are interested
- Funding is secured
- Growth is enabled
The reality: Mistakes prevent funding.
Mistake 1: Negative Working Capital
Fix negative working capital:
Why It Scares Funders
What the problem is:
- Current liabilities exceed current assets
- No cash cushion for operations
- Immediate cash flow problems
- High risk of default
Why it matters: Negative working capital is a critical red flag.
How to Fix It
Calculate it:
- Use our Working Capital Calculator
- See current position
- Identify improvement needs
Fix strategies:
- Improve collections to increase current assets
- Reduce current liabilities
- Build cash reserves
- Optimize inventory levels
Why it matters: Fixing improves position.
Pro tip: Fix negative working capital. Calculate position, implement fix strategies. Use our Working Capital Calculator to track improvement.
Mistake 2: Low Current Ratio
Fix low current ratio:
Why It Scares Funders
What the problem is:
- Inability to cover short-term debts
- Tight liquidity position
- Risk of default
- Financial instability
Why it matters: Low current ratio is a warning sign.
How to Fix It
Calculate it:
- Use our Current Ratio Calculator
- See current position
- Identify improvement needs
Fix strategies:
- Increase current assets
- Reduce current liabilities
- Improve cash management
- Build reserves
Why it matters: Fixing improves liquidity.
Pro tip: Fix low current ratio. Calculate position, implement fix strategies. Use our Current Ratio Calculator to track improvement.
Mistake 3: High Debt-to-Equity
Fix high debt-to-equity:
Why It Scares Funders
What the problem is:
- Excessive financial leverage
- High risk of default
- Heavy debt burden
- Financial vulnerability
Why it matters: High debt-to-equity is a warning sign.
How to Fix It
Calculate it:
- Use our Debt-to-Equity Ratio Calculator
- See current position
- Compare to industry standards
Fix strategies:
- Pay down debt
- Increase equity
- Refinance if possible
- Improve profitability
Why it matters: Fixing reduces risk.
Pro tip: Fix high debt-to-equity. Calculate position, implement fix strategies. Use our Debt-to-Equity Ratio Calculator to track improvement.
Mistake 4: Low DSCR
Fix low DSCR:
Why It Scares Funders
What the problem is:
- Inability to cover debt payments
- Weak payment capacity
- High default risk
- Unsustainable debt
Why it matters: Low DSCR is a critical red flag.
How to Fix It
Calculate it:
- Use our Debt Service Coverage Ratio Calculator
- See current payment capacity
- Identify improvement needs
Fix strategies:
- Increase operating income
- Reduce debt service
- Improve profitability
- Refinance to lower payments
Why it matters: Fixing improves payment capacity.
Pro tip: Fix low DSCR. Calculate position, implement fix strategies. Use our DSCR Calculator to track improvement.
Mistake 5: Negative Profit Margins
Fix negative profit margins:
Why It Scares Funders
What the problem is:
- Losing money on sales
- Unsustainable operations
- No path to profitability
- High failure risk
Why it matters: Negative margins are a critical red flag.
How to Fix It
Calculate it:
- Use our Profit Margin Calculator
- See current profitability
- Identify improvement needs
Fix strategies:
- Increase prices
- Reduce costs
- Improve efficiency
- Review business model
Why it matters: Fixing enables sustainability.
Pro tip: Fix negative margins. Calculate position, implement fix strategies. Use our Profit Margin Calculator to track improvement.
Your Next Steps
Identify mistakes. Calculate metrics. Fix problems.
This Week:
- Review this guide
- Calculate all key metrics
- Identify your mistakes
- Prioritize fixes
This Month:
- Implement fix strategies
- Monitor improvements
- Track metric changes
- Address all mistakes
Going Forward:
- Monitor metrics regularly
- Prevent mistakes from recurring
- Maintain strong foundation
- Stay funder-ready
Need help? Check out our Working Capital Calculator for cash position, our Current Ratio Calculator for liquidity, our Debt-to-Equity Ratio Calculator for leverage, our Debt Service Coverage Ratio Calculator for payment capacity, our Profit Margin Calculator for profitability, and our financial foundation plan for comprehensive improvement.
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Sources & Additional Information
This guide provides general information about financial foundation mistakes and fixes. Your specific situation may require different considerations.
For working capital calculation, see our Working Capital Calculator.
For current ratio calculation, see our Current Ratio Calculator.
For debt-to-equity calculation, see our Debt-to-Equity Ratio Calculator.
For DSCR calculation, see our Debt Service Coverage Ratio Calculator.
For profit margin calculation, see our Profit Margin Calculator.
Consult with professionals for advice specific to your situation.
