Sometimes applying for a business loan is easier than figuring out how much money you need to request in order to start up a small business or keep your current business open. If you find yourself in this situation, continue reading for some important tips that’ll help you figure out exactly how much money you really need to fulfill your dreams as a business owner.
Figure Out Your Startup Costs
If you’re looking to get a loan for starting up a business, you’ll first need to determine how much money you’ll need to actually get the business up and running. Your startup costs include everything from fees you’ll need to pay to incorporate your business and make it official, to office furniture and supplies. It also includes any equipment you’ll need to invest in to get the business running, and any amount of money that you’ll need to put towards renting or buying the facility you’ll use to run your business.
In order to come up with the most accurate number, figure out how much all of your supplies will cost, and cut corners wherever you can to save some money. While legal fees and rental costs, for example, are fixed, if you can find ways of saving money on furniture and equipment, do so. Once you’re done gathering and adding up all of the numbers, you should have a concrete idea of how big you need your startup loan to be.
Calculate Ongoing Costs
Just when you thought you had a number set for your startup, it turns out you aren’t finished yet. You need to figure out how much money in expenses you’ll be spending until your business is able to generate enough profits each month. Remember, every business operates at a loss at the beginning, so your loan will need to cover these costs in the meantime. Consider such long-term costs as rent, website domain fees, taxes, overhead, and salaries. Add up what you think these will be each month and then multiply that number by 12 months to give yourself enough time to get the business up and running successfully.
For Those Already Running a Business:
If you’re already in business but you need a loan to revamp it or push it forward in some way, there are other steps you need to take to determine the loan amount. When you apply for your loan, you’ll still need to show where all of the money will be going. Therefore, you need to think about and write down what you intend on doing and how much it will cost. For example, how much will the new equipment you bring in cost you? Are you planning on hiring more people and, if so, how much will you pay them?
There are a lot of complicated steps involved in getting a loan, especially in the business world. No matter what, you need to do some math to calculate exactly how much money you’ll need in order to cover all of your anticipated costs.
This guest post has been contributed by Brian Smith, who is a financial advisor at YellowStone Capital. He is very passionate about art and music. Visit yellowstonecap.com for more financial information and tips.