Most people do not have money on hand to fund a startup, which is why they continue working. Contrary to belief, there are ways to obtain money for such a large project, but it will not be easy. And, once you get the money you will need to make sure you have enough to support the first three years of the operation. One thing is for sure the process will start with budgeting. Below, you will discover a list of tips to help you finance your startup business.
Since your cash flow is probably limited, you will need to a month-to-month plan. This short-range plan will support your startup for at least a year. Once you start making money, you will be able to graduate from the month-to-month plan to a quarter-to-quarter plan and then a long-range plan. To create such a plan, you will need to gather information that is relevant to your startup business. This information will come from your balance sheets, income statements and cash flow needs.
Budgeting your balance sheet and income statement is a necessity, as it will enable you to determine your cash flow needs for your business. Failing to include the income statement and balance sheet in the budgeting process will be a big mistake, because it will not provide a full picture of your future financial need.
If this information is not available, you will need to start from scratch. Guessing on expenses and income will be your only option in this case.
How Much Are Your Predicted Facilities Costs?
Determining exactly how much it will cost to pay for your office, warehouse or storage space will not be easy. Coming up with the money to support such expenses will also not be easy. This is why many people decide to start their business right from their home. However, if you are not afforded this option, you will need to find a location for your startup, pay a lease security deposit and signage. These are your facilities costs, which will play a huge role in creating a doable budget.
Work On Your Credit
It is crucial to delete negative credit history prior to applying for a small business loan. If you do not, it will be very difficult to get approved. While you may be under the impression that every small business owner has perfect credit, this is a major misconception. In fact, many small business owners had to work on their credit score, before they could even begin thinking about starting a new business.
Know Your Capital Expenditures
The next step to budgeting for a startup is determining your capital expenditures, also known as fixed assets. These assets could include from equipment to furniture to vehicles, all of which are needed to set up your business location and get it started. Most startups require computers and some type of machinery from the very beginning of the operation. These items are typically very expensive, but they are a necessity.
Some people will also include the cost of supplies and materials that are also needed for the startup. These can include anything from office supplies to promotional materials.