Startups need a firm grasp of financial fundamentals. Whether you’re looking to secure funds from bankers or investors crucial startup accounting documents like income statements (income and expenses) and financial projections can convince others my company that your idea is worth investing in.
Startup finances often boil down to one simple equation. Either you have cash or you’re in debt. Cash flow can be a challenge for small businesses, and it’s vital to monitor your balance sheet so that you do not overextension yourself.
As a start-up you’ll probably need to seek out debt or equity financing in order to grow your company and make it profitable. Investors will be looking at your business plan, the projected revenue and expenses, and the likelihood that they’ll get the return on investment.
There are a variety of ways to fund your start-up. From getting a business card with an introductory 0% APR period to crowdfunding platforms, there are numerous options. However, it’s important note that the use of debt or credit cards can hurt your personal and business credit score and you should always pay off your debts in time.
You may also take out loans from family and friends who are willing to invest. This may be a great option for your company, but it is important to put the terms of your agreement in writing to avoid any conflicts and ensure that everyone is aware of what their contribution will be affecting your bottom line. If you offer the recipient shares in your company they’re considered an investor and that needs to be governed by the law of securities.