Raising capital is a basic need for all businesses. It is not always easy. Small business financial planning is crucial. Lack of funding is often the reason many businesses never get off the ground and the reason most business fail. It is not easy to find a small business start up loan. There are several sources for a small business loan and you should consider all options.
Personal Savings: Most often start-up funds come from ones own savings.
Friends/Relatives: Many people approach friends and relatives with their business ideas in hopes of gaining investors. Some choose this option over the bank because often the loan is repaid without interest of at a very low interest rate.
Banks: The most common source for capital is a bank. You must prove to the lender that your business is viable and well thought-out. If you are unprepared the lender will consider you a high risk and deny your small business start-up loan. You should know exactly how much you need. Explain why you need it and how you will repay it. You’ll want to convince the lender that you are a good credit risk.
Venture Capital: You will gain the funding you need from a venture capital firm in exchange for equity or part ownership. Your business plan must demonstrate your ability to make the business work. You can learn about the venture capital industry and find regional organizations at the National Venture Capital Association.
You must accurately estimate your business costs for up to the first year. First, identify all expenses required for start-up. Some are one time fees and others will be ongoing fees like utilities and inventory. Next, determine which are essential versus optional. You should only include those that are necessary for start-up. Those essential expenses can then be divided into two categories. You’ll encounter these terms over and over again, they are Fixed Costs and Variable Costs. Fixed costs include insurance, utilities, rent and administrative expenses. Variable costs are things like inventory and shipping expenses. Know your fixed and variable costs well.
Use a worksheet to list all your costs and help you estimate your total need for start-up. That’s good small business financial planning. Find more tips at http://www.smart-moms-online.com/
HowToStartYourOwnBusiness/tabid/105/Default.aspx
By: Michelle Yanik
About the Author:
Michelle Yanik, is co-owner of Smart Moms, a company committed to being the top online resource for moms who want to earn money from home and find work/life balance. Sign up for our information packed e-newsletter and get a complimentary copy of our e-book, Striking A Balance at http://www.smart-moms-online.com