You have an idea for an exciting new business. You’ve done your research and you’ve written a business plan. Now it’s time to answer the big question – how to finance a business. Let’s take a look at your options and the things you’ll need to consider in your quest for business funding.
Small Business Funding
Business funding is a broad concept. It can be used to describe many the financing needed for various business situations, like starting a new company, expanding a current business, or covering cash gaps. For now, we’ll focus on business funding as it relates to financing a brand-new business.
Things to Consider When You Finance a Business
Before you dive head first into your financing options, take some time to really understand what you’re financing. This is imperative. Obviously, you need to know how much funding is required to get your business off the ground. We’ll get into that a bit later. But you also need to have an idea of how those funds will be allocated.
Whether you’re borrowing money from a bank, working with a group of investors, or getting a loan from your parents, you’ll need to be able to explain what the money will be used for in specific terms. Here are some aspects of your business that could require startup capital.
Renting or Buying Space
If your business will be headquartered in your garage or a spare bedroom, great. You probably won’t need to worry about money for a workspace. But look into the near future – if your business grows the way you intend, can you sustain it in your garage?
For those who need a space, like an office, warehouse, or workshop, check out your options for renting or buying and keep those figures in mind for your overall financing needs.
Unless you’re running a one man show, you’ll need employees. And unless you have a network of people lined up to work for you, you’ll have to post jobs, work with recruiters, and run background checks – all of which cost money. Many people don’t realize, there are costs associated with hiring employees, not just paying their salaries. If you’re in the market for executives, senior management, or high-level tech gurus, your costs will be even higher.
Depending on your business model, you may require inventory to get started. Since you can’t make money without first having inventory, these costs will be part of your business financing.
Whether it’s a simple laptop or a multi-million-dollar piece of machinery, the costs for your equipment will likely come from your startup funds. Keep a running list of all the equipment you’ll need, not just the big stuff.
Managing the Customer Journey
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