Startups must have a firm grasp of the basics of finance. Whether you’re looking to secure financing from bankers or investors essential startup accounting records like income statements (income and expenses) and financial projections will convince others that your business idea is worthy of investment.
Startups’ financials often are based on a straightforward formula. You have cash or you are in debt. Cash flow can be a major issue for small businesses, and it’s crucial to keep an eye on your balance sheet to ensure that you don’t overexert yourself.
As a startup it is likely that you will need to look for equity or debt financing in order to grow your company and ensure it is profitable. Investors will look at your business plan, your projected revenue and costs, as well as the likelihood that they’ll get the return on investment.
There are many ways to fund your business. From obtaining an enterprise credit card with a 0% APR introductory period to crowdfunding platforms, there are numerous options. However, it’s important be aware that using credit or debt could harm your personal and business credit score, and you should always pay off your debts on time.
Another option is taking money from family members and friends who are willing to invest in your business. This may be a great option for your business, however it is important to put the terms in writing to avoid conflicts and make sure everyone is aware of what their contribution will be affecting your bottom line. If you give someone shares in your startup you are deemed to be an investor. Securities law is applicable to this.
