Startups need a firm grasp of the fundamentals of finance. Whether you’re looking to secure money from bankers or investors crucial startup accounting documents like income statements (income and expenses) and financial projections will aid in convincing others that your business idea is worthy of investment.
Startup financials usually boil down to a straightforward equation. You either have cash on hand or you’re in debt. Cash flow can be a challenge for new businesses. It’s essential to watch your balance sheet and make sure you don’t overextension yourself.
If you’re a new business it is likely that you will need to find equity or debt financing to expand your company and become profitable. Investors will review your business plan, projected revenue and costs, as well as the likelihood that they’ll get a return on their investment.
There are a myriad of ways to fund your startup. From obtaining a business card with an introductory 0% APR period to crowdfunding platforms, there are many options. It is important to take note that the use of credit cards or debt can affect your personal and company credit score. You should always pay off your debt promptly.
You may also take out loans from family and friends who are willing to invest. While this may be an excellent option for your startup however, it is important to put the terms of any loan in writing to avoid conflicts and make sure that everyone understands the implications of their contribution to your bottom line. If you offer someone shares in your startup, they are considered an investor. Securities law applies to this.