Startups must have a firm understanding of the financial basics. If you’re seeking money from bankers or investors important startup accounting records like income statements (income and expenses) and financial projections will help persuade others that your idea is worth investing in.
Startup financials usually boil down to a straightforward equation. You either have cash or you are in debt. Cash flow can be a major issue for new businesses and it’s important to monitor your balance sheet to ensure you don’t overexert yourself.
In the beginning, you’ll likely need to find debt or equity financing to expand your business and make it profitable. Investors will scrutinize your business plan, your projected revenue and expenses, and the likelihood of receiving a return on their investment.
There are many options to bootstrap a startup such as obtaining the business credit card that has a 0% introductory APR to crowdfunding platforms for a brand new business. It is important to keep in mind that using debt or credit cards can harm your personal and business credit score, and you should always pay off your debts in time.
Another option is to take money from family members and friends who are willing to invest in your business. This may be a great option for your company, but it is important to put the terms in writing to avoid any conflicts and ensure that everyone understands what their contribution will be affecting your bottom line. If you give the owner of your startup shares you are deemed to be an investor. Securities law applies to this.
