Business finance questions to ask before starting a business

Studies show that majority of businesses fail due to the fact that they simply do not have the cash resources to sustain their long term survival. Prospective business owners often focus only on getting enough money to get their business up and running and fail to focus on having the money to sustain the business once it is operating. While this can be a difficult thing to do if you want to increase the chances that your business will survive for the long term it is crucial that you are able to see how much you will need after you are open. If you are willing to do some planning and even ask for help if necessary it is possible to gain enough cash reserves to keep your business afloat until it becomes profitable. Asking yourself certain questions can help you determine where you need to focus. Here are business finance questions to ask before starting a business-

- What amount of money will I need to start my business?The type of business that you are starting will dictate the amount of money that you need. There are some businesses that can be started with hardly any capital while others will need a significant amount of money just to get them started. The bottom line is that if you need more money then what is in your savings account then you will need to start looking for startup business capital. Keep in mind that the more equipment and inventory that you need to get started the more money that you will have to come up with.
- Will I want to include investors for my business? Many prospective business owners think that the only way to finance their new business is to take on a business loan. However, it is important to realize that many of the most successful businesses were started by people who took on investors. If you are looking for a smaller investment you may want to consider approaching your family and friends. If you need a large scale investment then you will need to contact venture capital firms and angel investors to see if you can attract their attention and their capital. Keep in mind that the major advantage to using investors is that you will not be required to repay the investment even if your business fails.
- Will I want to assume debt financing for my business? If you cannot take on investors then you may want to try and obtain a loan from a local lender. Keep in mind that applying for a business loan is a lot more then just filling out an application. You will need to be prepared to put in some time and effort to the business loan process. The bottom line is that you will need to be able to convince the lender that you and your startup business are worth the risk.
- Will I have enough money to live on for at least a year? Many times overeager prospective business owners make the leap to running their own business without realizing that it most likely will not be profitable for at least a year or longer. Business finance experts stress that you should have at least enough money to live on for the first year while you run your business. If you fail to plan carefully you may find that you have to close the doors to your business in order to pay your bills. Make sure that you have enough to keep paying your rent or mortgage and taking care of other necessities so that you can focus on developing and growing your new business.