Startup Basics – Financial Start-Up Basics
Startups require a solid understanding of financial fundamentals. If you’re trying to convince banks or investors that your business idea deserves investment, key financial records of a startup such as income statements (incomes and expenses) and financial forecasts will help.
Startup finances often boil down to a straightforward equation. You have cash in your bank or you’re in debt. Cash flow can be a challenge for small businesses, and it’s vital to monitor your balance sheet to ensure that you do not overextension yourself.
As a start-up you’ll probably need to seek out debt or equity financing to expand your business and ensure it is profitable. Investors will typically look at your business’s model, projected costs and revenue and the probability of earning a profit from their investment.
There are many options to help a startup get started, from getting a business credit card with the introductory rate of 0% to crowdfunding platforms for a new business. It is important to keep in mind that borrowing money or credit cards could negatively impact your credit score, both for business and personal scores. Always make payments on time.
Another option is to take money from family members and friends who are willing to invest in your venture. While this might be an excellent alternative for your startup however, it is important to write the terms of any loan in writing to avoid conflicts and make sure that everyone knows how their contribution will impact your bottom line. If you give an individual shares of your business they’re considered an investor and that needs to be governed by the law of securities.
