Funding For Your Business
Money is the root of all evil. Money makes the world go ‘round. Money doesn’t grow on trees. There are good arguments for claiming all three of these statements are valid. What is definitely absolutely, positively, unquestionably true is that you can’t run your business without money. It’s a must. You have to have money before you even begin your business and then, you’ll have to have money to make money. Where do you start, though?
Start Up Capital
There are several places you can get money to start your business. One of the most common is typically called “bootstrapping.” That’s where you fund yourself. You work and save until you have the money in your own account to start your business without much help from anyone else. You can consider other sources, though. Sometimes family and friends are willing to invest in your dream – or at least loan you a little bit to get off the ground. You could charge things to your credit cards, but watch the interest rates. Crowdfunding sites could be a source of income, especially if you’ve got a great story to go with your business. Loans from the Small Business Administration or a bank are common ways of securing capital. Lesser utilized forms of raising money come from angel investors or venture capitalists. Angel investors are individuals who provide businesses with start-up cash in exchange for partial ownership or convertible debt. Venture capitalists are similar. Their payoff comes in the form of an equity stake.
Up and Running
Once your company is operating, you have to work to keep it going. One of the key components of that is working capital. What is that, anyway? Net working capital describes the amount of money you have to work with once you subtract your business’ liabilities from your assets. Most businesses require a working capital ratio of 2:1, meaning you have twice as many assets as you do liabilities. Your working capital represents how much cash you have on hand to meet any and all current expenses. Sometimes, you have a better or worse ratio. For example, if your business experiences seasonal fluctuations, there will be times of the year when you’re stocking up for your anticipated busy season. Your ratio will be worse during your preparation period and better once your busy season hits and customers start handing you their hard-earned cash in exchange for your product or service.
Regardless of where you are in the process of financing your business, money management knowledge and skills are a must-have commodity.
