So you’re planning on starting your own business this year … now what? While your head may be flooded with brilliant business ideas and plans, those plans mean nothing without first developing a strong financial base. Keep reading to find out how you could become a true business professional and develop a booming business with our financial checklist.
Choose your funding
First, you must decide how you will be achieving your funding. If you are seeking funding for your business through a business loan, you may need to develop a formal business plan. Before you approach a bank for funding, make sure to ask if they prefer a “one-page pitch” or a traditional business plan. Other options for funding could include grants and venture capital, as well.
To help determine how much funding you will need, develop a finance roadmap by calculating how much investment you will need to achieve each milestone. This roadmap should include a bottom-up cash flow projection, high-level income statement and balance sheet.
Consider your desired rate of growth. The quicker you want your business to grow, the more initial investment you may need.
Take into consideration the various factors loan officers use to determine whether or not they will fund your business—like your credit, equity, earnings and collateral.
“At Two Rivers Bank & Trust, we advise individuals seeking a business loan to consider all factors in their plan, and to look at the process from a global perspective,” explains Vice President of Commercial Lending Kevin Lease. “It’s also important to evaluate the “what ifs” of the particular industry, and to develop a full-circle, well-researched business plan that truly showcases your passion and ambition.”
Choose your financing
Once you have determined your funding, you will need to determine your business financing type—debit or equity financing.
Debit financing allows you to borrow money from the bank without giving up ownership of your business. This financing is seen as more of a short-term strategy, giving you cash up front which you agree to pay back to the bank with interest.
Equity financing means issuing additional shares ofcommon stock to an investor. The more shares of common stock issued and outstanding, the lower the value of the previous stockholders’ percentage.
Choose your structure
Depending on the type of business structure you choose, the legal and tax implications will vary. Before deciding on the structure of your startup, be sure to do thorough research on each structure type and the various tax obligations of each.
Choose your odds
Improve your odds of financial success by understanding how to prepare and present financial statements, including a cash flow analysis, breakeven analysis and income statement.
Develop a strong relationship with your financial partners and the various investors in your business. The better your relationship, the more likely you will be to seek out their financial support or guidance.
“Developing a business dream team is the key to building a strong, well-rounded business,” says Lease. “Any connections you can make to help you learn about the industry and identify the unknowns, will help to improve your startup’s financial success and general stability.”
If developing a startup business is on your horizon, be sure to surround yourself with a strong financial partner—like Two Rivers Bank & Trust. We understand what it takes to start a business from the ground up, and are here to help guide and support you on your road to financial success. Visit our website to learn more about our financial solutions for your business or contact us today.