It goes without saying that it takes money to start a business. Funding is an evolving and crucial factor in keeping your start-up running for the longest interval possible. Finance is mostly the segment where most business owners make mistakes, and they either choose the wrong methods to fund their business or end up borrowing vast amounts of money that exceeds their need and later find it hard when they need to pay off. Whatever it may be, wrong financial decisions can drastically affect the overall structure of a business.
Before you start planning ways to fund your start-up at its initial stage, you first need to consider how much funding you will need.
How To Determine The Amount Of Money Your Start-up Needs?
It is a tricky question. Well, every start-up owner has the propensity of getting the highest amount they can generate. But every business has different needs, and there is no one size fits all financial solution. And it’s necessary to plan the economic future of a business beforehand. The personal financial situation of the business owners and the possible calculations of expenditure help shape the financial future as when you will know how much funding you need, you can consider the right ways to get that money.
So, let’s start with calculating the start-up cost before launching. Successfully calculating the start-up cost will help you in:
- Estimating Profits
- Securing Loans
- Attracting Investors
- Saving Money In Tax
- Conducting Strong Analysis
The Three Categories of Start-ups
Most businesses will fall into three major categories: brick-and-mortar businesses, service providers, and online businesses. And depending upon your business type, the expenses will vary. The typical start-up cost may include costs for:
- Office Space
- Licenses And Permits
- Equipment And Supplies
- Employee Salaries
- Advertising And Marketing
When you have listed your expenses, this is the time to estimate how much they will actually cost. Some expenses will have well-defined costs, whereas others will be a little less certain. If you are unsure how to estimate all the costs accurately, you can talk directly to mentors and ask for help.
How To Fund Your Start-up Initially?
OK, so now you have a clear picture of how much funding you will need to initially start and run your business. Let’s figure out how to get it. There are three ways to get financing for your business:
Self-Funding: It is also known as bootstrapping, where you leverage your own financial resources to start and run your business. You can turn to family and friends for capital. With self-funding, you have total control over your finance, but the entire risk comes upon you. Be careful not to spend more than what you can afford. And if you have tapped into your retirement accounts, come on, you need to be extra cautious.
Loans: If you want to retain complete control of your business and don’t need a huge amount to start, you can apply for a small business loan. To secure a business loan, you must have a business plan, expense sheet, and financial projections for the next five years. All these documents will help your bank consider if they’re making the right choice by giving you a loan. You can compare offers and get the best possible terms while getting a small business loan for yourself.
Investors: Investors can help you start your business by giving you the necessary fund. But the problem of reaching out to our venture capitalist is you need to offer an ownership share in exchange for the money. And as a result, they will get an active role in your company. Another option of getting funded is crowdsourcing investment. A crowdfunder doesn’t receive a share of ownership, and you get complete control of your business.
Community Support for Your Start-Up
There are many other lending programs where it’s a shallow risk for a business owner to borrow money. NEW Community Investments offers support and solutions when you need money to fund your start-up. We serve low-income communities in the Greater Los Angeles are and work closely with start-ups like yours to help you determine the best options you need to reach your financial goals. Apply today for 1-on-1 support and lending solutions.