How Much Money Do You Need to Start a Business?

by Startacus Admin

You've got an amazing idea, you know there's a need for your product in the market, and you can even picture your logo. Now all you need to start your own business is the financing.

Finding the cash to launch your own company is one of the most difficult parts of becoming an entrepreneur. While many people have the drive, passion, and dedication to become a business owner, the truth is that very few of us have the initial capital required to start an organisation from scratch without any outside help.

More often than not, you're going to find yourself turning to banks, building societies, and credit solutions for loans and other sources of capital. However, before you can go out an apply for that credit, you need to figure out how much money you need.

Planning your Financial Resources

The more loans you apply for as a business owner, the more likely you are to harm your credit rating and make it harder to get the interest rates that you want. With that in mind, it pays to apply for the right amount first-time round. Unfortunately, it's very easy to underestimate how much funding you're going to need to get started.

Without plenty of financial resources, your company is going to have a hard time finding its footing - no matter which industry you're in. It's worth realising that it might take some time for your incoming money to match your outgoing costs. The first step in making sure that you apply for the right amount of cash is figuring out your expenses.

Adding Up Your Expenses

There are various different costs associated in running a successful business. When you're first getting started, you'll have start-up costs to think about, like paying for a logo design or buying a website. You'll also need to consider your long-term recurring costs for things like employees, materials, office hire, and so on.

Begin by making a list of all your one-time, and recurring costs. One-time costs include things like the legal costs for registering your business, or the starting expenses that you pay for making sure that you have plenty of inventory. You'll also need to buy a license depending on the kind of industry that you'll be working in, and you may need to purchase real estate too.

Recurring expenses might be a little harder to predict - particularly if you don't know exactly where you're going to go with your business next. Think about costs like salaries for your employment, payments for resources and raw materials, and maybe even marketing costs. You'll also need to consider maintenance fees, accounting fees, and legal fees.

Calculating your Resources

Once you have a basic idea of how much money you'll be spending, both now and in the foreseeable future, the next step is to figure out how much cash you've already got on-hand, before you head out to get your loan. Don't panic if you don't have a lot of starting capital to work with - the truth is that most people don't have a huge amount of money to put into their business at first. Ideally, however, you should start saving money aside for your new venture while you're still employed in your full-time job, so you can have a little bit of cash to put towards things like down-payments.

Some of the money options you might use to fill the gaps in your investment fund might include:

• Personal cash - if you have any assets in your bank account that you've been saving towards something big, now could be the time to use them. You can even use physical assets as collateral to secure your financing in some cases.
• Family and friends - A lot of new entrepreneurs find themselves turning to friends and family members for help when they're just getting started. Often, these loved ones won't mind waiting a little longer for a repayment, just remember that it can be dangerous to ask for too much from the people you care about.
• Investments: If you know people who are interested in owning a part of your business, then they might be willing to hand over some cash in exchange for equity or stock. Make sure that you know your rights before you start exploring options like this.
• Grants: The UK has a number of grants available to new business-owners, so make sure that you're not eligible for anything before you assume that you can't get any help.

Take your available cash away from the amount of money you need for the first 6 months or so of operating your business to see what kind of loan you need.

 

 

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Published on: 7th December 2018