|Start Up Capital||| Print ||
A leading cause of small business failure is inadequate start-up capital. Before you begin your new venture, you must realistically project not only your start-up costs for such things as equipment, renovations, and promotion, but also your cash flow requirements for the early stages of operation. It often takes time to build sales levels, yet rent, utilities and other costs are immediate. During this time, bills are arriving faster than the customers; cash reserves can help the business survive. Funding needed for start-up and operation of a business is available in two forms: (1) debt capital - borrowed funds; and (2) equity capital - funds generated through the sale of stock, or by the investment of the owner.
The terms on repayment of debt capital vary and are negotiated between lender and borrower. Raising capital through the sale of stock is complex and highly regulated; you should seek legal advice. More than half of all businesses are started with capital invested by the owner or the owner’s family. Should you decide that your own resources are insufficient, the traditional sources of financing are: banks, local, state and federal agencies, and venture capital firms.
Start Up Costs
Start-up costs are those expenses that you will incur before your business opens. They vary according to the type of business, but there are some common considerations for everyone estimating their start-up costs. The sample worksheet will help you begin the process of assessing your financial needs so that your venture is not undercapitalised at the outset.
Some of your start-up expenses will also become ongoing monthly costs once your firm is in operation. It is necessary to estimate all of your monthly costs so that you are realistic about the income your firm will need. The following worksheet includes some basic considerations. Completing it will help you and your accountant develop cash flow projections.