Startups require a solid understanding of financial fundamentals. Whether you’re looking to secure financing from bankers or investors crucial startup accounting documents like income statements (income and expenses) and financial projections will help persuade others that your idea is worthwhile to invest in.
Startup financials usually boil down to a straightforward equation. You either have cash or you’re in debt. Cash flow can be a challenge for small businesses, and it’s vital to keep an eye on your balance sheet to ensure you do not overextension yourself.
As a startup, you’ll likely need to find debt or equity financing in order to grow your business and make it profitable. Investors will look at your business plan, the projected revenue and expenses, and the likelihood of getting an investment return.
There are many ways to fund your start-up. From getting the business card that has an introductory 0% APR period to crowdfunding platforms, there are a myriad of options. However, it’s important take note that the use of credit cards or debt can harm your personal and business credit score. You should always pay off your financial startup basics debt in time.
You can also borrow funds from family and friends who are willing to invest. While this is an ideal option for your startup however, you must set the conditions of any loan in writing to avoid conflicts and ensure that everyone knows how their contribution will impact your bottom line. If you give someone shares of your startup they’re considered to be an investor and that needs to be governed by the law of securities.
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