Many entrepreneurs need financial resources to start or expand a small business themselves and must combine what they have with other sources of financing. These sources can include family and friends, venture-capital financing, and business loans.
When considering financing options, have a good understanding of your financing needs as well as the type of options available to help you start and sustain your business. Some key issues to understand with regard to your business are:
- Borrowing Money – Key elements are understanding types of financing, your credit history, equity investment, collateral and the management experience of your team
- Business vs. Personal Finances – A business can place a tremendous strain on your personal finances. Prepare yourself by developing a monthly household budget and understanding your personal credit situation, both of which will determine how you are perceived by potential lenders and suppliers.
- Estimate Startup Costs – You must know how much money you will need to keep your business afloat. Determine the amount of seed money, one-time costs and ongoing costs you expect and decide if they are essential or optional. Identify fixed and variable expenses.
- Financial Statements – Understanding your assets, liabilities, inventory needs and intangibles is critical to having a sound financial model for your business.
- Breakeven Analysis – A startup business owner must understand that $5,000 of product sales will not cover $5,000 in monthly overhead expenses. Online resources are available to help you determine when your business will be able to cover all of its expenses and begin to make a profit.
The answers to these issues are critical in determining the success or failure of your business. The economic development team of the Springdale Chamber can assist you in developing a strategy to prepare your business financing.