• What are some business funding sources?
• Does your business make basic financial sense?
• What are your current financial circumstances?
• Do you feel like you’re in the right place at the right time?
• Financing requires management.
• What do your finances look like on paper?
• What are start up costs?

What are some business funding sources?

The current banking and economic crisis has had a huge impact on the overall business environment. This has caused a tremendous strain on established businesses so you can imagine how it has affected new ones. Yet, some businesses appear to be thriving and there are financial sources to help startups. In addition to stimulus measures, they include loans, lines of credit, leasing, venture capital investment, grants, angel funds and business incubator efforts.

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Does your business make basic financial sense?

The question you will answer repeatedly is “Am I making money?” Can I make a profit? From a practical perspective, your business operates on the same principals of your ATM account or the money you keep in your wallet. Money comes in… and money goes out. Where do you stand at the end of the day?

Businesses also need to comply with standard accounting practices and local, state and federal criteria and requirements. In addition to keeping detailed records, a regular schedule of returns needs to be processed and filed. Some businesses are capable of doing this work on their own – but misunderstandings and lack of filing paperwork can result in fines and penalties.

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What are your current financial circumstances?

There are many factors that determine whether or not you need financing and there are many ways to get it. In some instances it relates to your startup position. Are you using your own assets, equity, or borrowing money by putting your home up as collateral? Do you have a line of credit or an inheritance? If you don’t need financial backing right away, will you require it to grow your business? Do you have sales right now that are helping you cover expenses on a weekly or monthly schedule? If you are making money right now, are you paying yourself? Or, if not, do you feel like you have nothing to loose by making the leap to self-employment and business ownership?

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Do you feel like you’re in the right place at the right time?

Is this a natural transition for you? Are you solo or do you have family and friends backing you up? Do you have a no or low rent deal from a current customer or vendor that makes your overhead low? Is your enterprise large or small and already up and running? Or, do you have a plan that’s complex or unusual? Need manufacturing facilities and expensive equipment? Do you have an idea or product that will take years to develop and test? Are you ready to begin research and development? Do you need five, ten, fifty or more employees? Is there a chance that your idea may fail or that a competitor will reach the marketplace before you?

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Financing requires management.

In any case, if you need financing, your personal financial history matters and you’ll be tested. How risky your idea is will also come into play. Are you and your proposed idea a good investment? You’ll need a Business Plan to prove it. If you’ve written one out of necessity as an earlier step, or taken the time to write one for other reasons, you will fully appreciate its value during this phase of your startup journey. Anyone providing capital or a loan will need to understand your finances.

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Tip: If you’re not a MBA, you’ll need to do a lot of homework and you should seek a CPA, financial advisor, or business and tax consultant.

What do your finances look like on paper?

Whether you’re just starting up or somewhat into the process you will learn quickly that success matters. Are you currently achieving sales goals or exceeding them? Does your concept continue to draw positive attention from customers, prospects, the industry and your community? Are you maintaining success?

On real estate, equipment, leasing, and loan applications you’ll be continually asked how many years you’ve been in business. If the answer’s none, or less then three year’s, be prepared for your applications to be scrutinized and there may be more restrictions placed in your agreement. One requirement might be a personal guarantee. When you’ve been in business five or ten years it can be somewhat easier because you have a track record and references. In that case, a potential lender will check your credit, contact your bank and three or more businesses that you work with. If they’re satisfied, you’ll be extended credit.

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What are start up costs?

Startup costs vary by the type and scale of the business – some need very little – others need major investment because they may involve a large facility, equipment, many employees and/or inventory. There are a few costs that are one time such as the initial cost to register and setup the business and the rest are ongoing. Beyond that, expenses can be divided into two categories: Fixed (which can mostly be considered as your overhead) and Variable (expenses that are related to business sales).

Fixed Expenses
• monthly rent
• utilities
• administrative costs
• insurance costs

Variable Expenses
• inventory
• packaging
• shipping
• sales commissions
• other costs associated with the direct sale of a product or service

Always be conservative when estimating startup costs, and try not to leave anything out. Many startups make the mistake of underestimating the cost of getting a business off the ground. Also, don’t count things twice. You may want to invest in QuickBooks, an application that will help you record financial activity and generate important reports to use for your own analysis as well as for your accountant. Spreadsheet applications, such as Excel, can also be very useful.

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Tip: When calculating costs, add a miscellaneous line for the unexpected and make that 10% of the total.