*This information is taken from the North Carolina Rural Entrepreneurship Development System and the NC Department of Commerce Business ServiCenter. The packet is entitled “Fueling Your Business in North Carolina: A Guide to Financing for Small Businesses” and can be viewed here.
How do you Plan on Financing your Business?
Many people use the bootstrapping method to generate money for their business. Bootstrapping is when you use your own money to get the business started, and you keep reinvesting that money back into the business. Not everyone can afford to bootstrap a business.
If bootstrapping isn’t for you, then maybe seek out a venture capitalist who will fund your business.
Assess your Financial Needs
Think about equipment, supplies, renting a space, the cost of buying a building, any construction, furniture, insurance, marketing, legal fees, permits, phones and Internet, just to name a few. All of these expenses will be just what the name entails: expenses. Make sure to obtain an estimated amount of costs.
You also might want to have a contingency in your start-up budget. Nothing is wrong with having a little extra money available in case your estimated start-up costs are wrong. Contingencies can also be helpful if you do not immediately attract many clients to your business.
Your start-up budget will hopefully enable you to see what spending you can reduce or eliminate.
Ways to Finance your Business
- Money from family and friends (always document where the money came from, any interest rates, how loan will be paid back, etc.)
- Credit cards
- Vendor financing
- Government agencies, such as the Small Business Administration
Yay! Now you have financing, hopefully. Remember: the money must be paid back. Make sure you have a repayment system in place. To tackle repaying your loan and paying taxes, here’s a list on what to pay in chronological order:
- Pay taxes
- Repay loans
- Reinvesting in your business and paying employees
- Personal expenses
Now you should know how much money you need, how much money you have to invest in your business, and whether or not your need financing.
Contact the SBCN