Startup Basics – Financial Start-Up Basics
Startups require a thorough understanding of financial fundamentals. If you’re trying to secure money from bankers or investors, key startup accounting records such as income statements (income and expenses) and financial projections can convince others that your business idea is worthwhile to invest in.
Financials for startups often boil down to a simple formula. You either have cash on hand or you’re in debt. Cash flow can be a problem for young businesses and it’s important to monitor your balance sheet to ensure you don’t overextend yourself.
In the beginning you’ll most likely have to look for equity or debt financing to expand your business and make it profitable. Investors will typically look at your business model, projected costs and revenue as well as the likelihood of a return on their investment.
There are many options to start a business such as obtaining the business credit card that has APR that is 0% to crowdfunding platforms to help a new business. However, it’s important note that the use of credit cards or debt can impact your personal and business credit score. Therefore, you must always pay off your debt promptly.
Another option is to take money from family members and friends who are willing to invest in your company. While this might be a good alternative for your startup however, it is important to make the conditions of any loan in writing to avoid conflicts and ensure that everyone knows the implications of their contribution to your bottom line. If you offer the recipient shares in your company they’re considered to be an investor, and thus need to be governed by the law of securities.