A great business idea, great skills, and rich expertise are not the only things that you need to have for getting your startup in action. Money is what you require the most when it comes to starting a venture and fuelling its growth. And you will probably need a lot of it during the initial phase. While you may think that your personal savings may be enough to finance your new business, it often falls short when you actually take the leap. Fortunately, there are several options that entrepreneurs can explore to get their business revving up. Here are some key funding facts that every entrepreneur should be aware of before going ahead.
Start with a business plan
First things first, you need to have a proper business plan to bridge the gap between your idea and reality. Essentially, the plan should highlight the financial aspects of launching your company in a crisp and clear manner. A written description, with plenty of visualization in the form of charts and graphs, is the right way to do things. Typically, the plan should highlight the first 3 to 5 years of strategy and projected growth. Besides helping you with future planning, a business plan is also needed to arrange funds from investors.
Secure appropriate funding
The most vital part of an entrepreneur’s journey is arranging adequate capital. Whatever your funding requirement may be, you need to explore the most feasible option. Compared with the conventional funding alternatives, small business administration loan programs make the smartest option. Sean Landry from the American Bank of Missouri explains that the term of an SBA (small business administration) loan depends on the reason for the loan. This makes them ideal for startups that look for funding with easy and flexible terms. Since these loans are partially backed by the government, they typically get you higher amounts with lower interest rates. Further, you can get the advantage of longer repayment terms as well.
Ensure that you have relevant documentation
Once you find the best funding option, you will require the relevant documentation to avail it. Basically, you will need your sales forecast, profit and loss statement, balance sheet and cash-flow statement to get started. The last one matters the most because a majority of start-ups fail due to cash-flow problems. The importance of preparing your financial statements goes much beyond ensuring approval for funding; they also help you to determine how much funding you will need to survive and sustain. It may be more than what you had initially anticipated.
Managing your funds is vital
Another fact that every new entrepreneur should know about funding relates to the judicious use of the funds they procure. The idea is to use the money only for business while ensuring that you pay your bills, interests and taxes on time and adhere to regulatory compliances as well. At the same time, be prepared to face financial challenges because they are an integral part of a startup’s journey.
Startup financing requires careful planning, right from the amount of funds you procure to the source you get the money from. However, your journey can be much smoother and growth prospects much brighter if you take the right approach.