Anyone can start a business for any reason. Curiosity, passion, or even just trying to make money can all be motivators. That being said, if you don't at least have a plan for your full business from startup to cashing out, you can put yourself in a position that is less than ideal. More than any other step in creating your own startup, you absolutely cannot neglect the initial financing. Rather than taking the funding step as unimportant and putting yourself in a hole right off of the bat, make sure you consider these top three tips to watch out for.
Don't Take Out More Than You Need
If you are going to take the time, energy, and overall effort and put it all towards something in the first place then you want to minimize your debt. You are already trying to break into the field as it is so you will need to put significant funding into your machinery, marketing, and materials (plus more). Do you really think it makes sense to have a higher loan out than you need? Not only will you be paying higher interest on the capital you have borrowed, you may also be tempted to blow through your loan quicker because it's just sitting there.
Buying Brand New
Too many entrepreneurs will jump right into their field and will be so exited to get to work that they'll buy brand new equipment. Some things you may want to buy new, but most equipment can be had for a reasonable price if you buy it used! Plus, if you buy new then not only are you paying a higher markup, you are also paying the dealer through their financing. You are getting hit in the wallet from both sides. Instead of playing the dealers' games, you can find the right type of financing and set yourself up for success.
Keep Your Business and Private Finances Separate
Entrepreneurs that combine their personal finances with their business' will only cause chaos come tax season. That being said, you also need to know the difference when it comes to what can be a business expense and what can't. The costs of fuel, meals, hotel stays, and etc. will all start to add up, and if you can keep the majority of your purchases in the business expense column, you may just wind up having a nice tax return at the end of the year.
Jonah Engler is a financial service expert from NYC.