The ABC of Business Financing

Any business needs three basic things to get it off the ground: finance, ambition and a good plan of action. Ambition is what keeps you at it when you encounter obstacles, and a good plan would help you apply for financial aid. Business financing is critical to the success of a fledgling business, yet most people pay only superficial attention to it.

Three Things You Should Keep In Mind About Finance

How much? When you are launching your business, the projected amount usually includes the initial operational costs until the break-even time. What most people tend to neglect is that until that time, you need to support yourself as well. The gap unless carefully addressed, would eat into your capital (meant for your business) and you end up with shortage of funds. This is further aggravated by the fact that your business has not yet reached its break-even point, which would further condemn it to failure. This is why when you calculate the projected amount you need to add to it your sustenance costs well past the breakeven point. You should not depend upon the earnings from your business until it provides a reasonable profit.

How? The first thing that comes to your mind when you think of ways to raise finance is banks. However, that should be your last resort. Many business fail because the profits are buried in the repayments of loans availed for capital funds. Try to launch your business in baby steps, using whatever money you have saved as the initial investment. Expand gradually with the profits gained. In this way, you learn strict financial discipline and avoid the pressure of loans at the same time.

When? “This is easy”, you would say. “Of course, in the planning stage”. You will be surprised to learn that this is one of the most popular myths today. You should try your best to launch your business based on your own funds. Apply for loans only after you are satisfied that the business is on track and gives you reasonable returns. In this way, you would need less effort to sell yourself to your bankers, and have better chances of steering your business towards success.

Business financing is all about these three factors. You pay attention to these, and everything else will fall into place.

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