How to determine the amount of money your business needs
While you may have always dreamed of starting your own business the reality is that it often takes a great deal of money to do so. Prospective business owners will have to spend a great deal of time planning and researching what their financial needs will be in terms of getting their business up and running. Keep in mind that while this is not an easy task with some basic information you can make informed decisions about what you need to run your business financially. Here is what you need to know about how to determine the amount of money your business needs-
- Begin with your personal credit-It is important to understand that how much you are able to borrow to start your business will be based in large part as to how good your personal credit it. If you have a stellar credit score you will be viewed much more favorably by the lender that you are applying to. They will see you as much less of a risk. The first step is to make sure that you have pulled your personal credit report and gone over it completely. You want to make sure that it only reflects the most accurate and up to date information. Keep in mind that if you do find problems it can take some time to fix them so you should do this well in advance of trying to get business funding.
- Decide what start up expenses you will have-Once you know that your credit score is going to ok its time to move on to the details of your business. You will need to have a clear idea of how much money you will need. There are many different categories that you will need to go over and come up with a firm figure as to how much they will cost. Keep in mind that your lender will not be impressed byvague numbers and guesswork. You will have to do the work to find out how much you will need to borrow.Some of the cost will include but are not limited to:inventory, permits and licensing costs, insurance, equipment purchase, physical space and utilities, computers and applicable software, marketing expenses, and payroll. You will also need to consider any industry specific costs that you may have.
- Borrow only what you need-New business owners often make the mistake of taking every dollar that is loaned to them. However, this can be deadly for your new business. Studies show that the more debt your new business is saddled with the lower the chances of long term success. While you may love the fact that you have money to get everything that you want as well as need, you should try to limit your borrowing to the bare essentials. When your new business does not have to worry about paying back excess debt you can focus more on growing your business and making it profitable for the long term.
- Think outside of the box when it comes to financing-The bottom line is that most business owners struggle to find the optimal solution to their business financing needs. Many lenders simply a view a new business as having to much risk to lend money to.Today, it is harder then ever to get the money you need to start your business. You will need to have creativity, resourcefulness, and patience in your pursuit of business funding. If you are willing to think outside of the box and consider several different types of funding you most likely will be successful in getting the money you need to make your business dream a reality.