Startups require a thorough understanding of financial fundamentals. Whether you’re looking to secure money from bankers or investors crucial startup accounting documents such as income statements (income and expenses) and financial projections will help persuade others that your idea is worthwhile to invest in.
Startup financials often come down to a simple equation. You have cash or you’re in debt. Cash flow can be a challenge for young businesses. It is important to keep an eye on your balance sheet and not overextend yourself.
If you’re a new business, you’ll likely need to seek out debt or equity financing to expand your business and become profitable. Investors will scrutinize your business plan, projected revenue and expenses, and the likelihood of getting a return on investment.
There are a myriad of ways to start a business. From obtaining an enterprise credit card with the introductory rate of 0% to 0% period to crowdfunding platforms, there are a myriad of options. It is important to keep in mind that borrowing money or credit cards can negatively impact your credit score, both for business and personal scores. Always pay your debts on time.
You may also take out loans from friends and family members who are willing to invest. While this could be a good alternative for your startup however, you must set the conditions of any loan in writing to avoid conflicts and make sure that everyone knows how their contribution will impact your bottom line. In addition, if you offer an individual shares of your business they’re considered an investor, and thus need to be governed by securities law.