Startups require a thorough understanding of the fundamentals of finance. If you’re seeking funding from investors or bankers essential startup accounting records such as income statements (income and expenses) and financial projections will help persuade others that your idea is worthy of investment.
Startup financials often come down to a straightforward equation. You either have cash on hand or you’re in debt. Cash flow can be a challenge for businesses that are just starting out and it’s crucial to keep an eye on your balance sheet so that you don’t overextend yourself.
As a startup you’ll probably need to find debt or equity financing to expand your business and become profitable. Investors will look at your business plan, the projected revenues and costs, and the likelihood of receiving the return on investment.
There are many ways to start a start-up. From obtaining the business card that has an introductory 0% APR period to crowdfunding platforms, there are a myriad of options. It is important to note that the use of credit cards or debt may affect your personal and company credit score. You should always pay off your debts promptly.
You can also borrow money from friends and family members who are willing to invest. This is a good option for your business, however it is important to put the terms of your agreement in writing to avoid conflicts and ensure that everyone is aware of what the contribution will mean to your bottom line. In addition, if you give someone shares of your startup they’re considered an investor and therefore need to be governed by the law of securities.