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| You've written your business plan and
the search is on for seed money to finance everything
from business cards to location. But keep in mind that
working capital is as important as start-up capital
because it's the money you'll need for the day-to-day
operation of your business - supplies, employee payroll,
rent, utilities and other bills. To "keep your venture
from taking a quick nosedive" because of unanticipated
expenses you should project costs for the first three
months of operation. If you have only enough money for
the first few days of operation, you could kill your
business before it gets off the ground because it is
unlikely that sales during the grand opening will push
you into the profit zone. |
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| Plan on bankrolling your business
through either debt or equity financing. With debt
financing, you borrow funds and, over time, repay them
with interest. But the ideal financing is with personal
assets because you'll avoid or minimize debt. Sources
for financing can include family and friends, credit
cards, commercial and community banks, trade credit,
small business investment companies (SBICs) or state and
federal government-assisted loan programs, such as the
Small Business Administration. Equity financing lets you
avoid debt entirely but you'll have to give up sole
ownership of your business. And you may lose management
of the company if the majority investors want to run the
business. A 50/50 equity split is not uncommon for
start-up firms but a 51/49 split is also popular. |
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