Startups require a thorough understanding of the fundamentals of finance. Whether you’re looking to secure funding from investors or bankers important startup accounting records such as income statements (income and expenses) and financial projections can convince others that your business idea is worthwhile to invest in.
Startup financials typically boil down to a straightforward equation. You either have cash on hand or you’re in debt. Cash flow can be a major issue for new businesses and it’s crucial to keep an eye on your balance sheet to ensure you don’t overexert yourself.
You’ll need equity or debt financing to expand and make your business profitable. Investors will scrutinize your business plan, the projected revenues and costs, and the likelihood of receiving the return on investment.
There are a myriad of ways to help you bootstrap your business. From getting the business card that has an introductory 0% APR period to crowdfunding platforms, there are many options. However, it’s important note that the use of debt or credit cards can harm your personal and business credit score. You should always pay off your debts on time.
Another option is to take money from friends and family who are willing to invest in your company. This is a good option for your business, however you must always put the terms of your agreement in writing to avoid conflicts and make sure everyone is aware of what the contribution will mean to your bottom line. If you give someone shares in your startup and they become an investor. Securities law is applicable to this.