When most small businesses owners hand their shingle, they have a certain amount of money they plan on using to get started. Perhaps it is money they have saved or borrowed from friends and family but in any case, it is usually limited. While not true in every case, a business often takes longer to gain momentum than anticipated and as such, more capital will be necessary to get up to full speed than they had hoped or planned. As the most common reason that businesses fail during startup is lack of capital, addressing this problem early is critical.
As a rule of thumb, you should have at least 6 months worth of cash to start a business. If you are starting a capital intensive business that involves the development of a product, you should plan for even more startup capital for product development and inventory.
Don’t get too worried though, there are ways to avoid early business doom. It is always more likely to get the attention of a bank when you are not desperate, so approach banks early to establish a line of credit. When you are new in business you will likely have to add a personal guarantee to gain this, but it is the best way you can get your business started in establishing bank credit. It is easier to get money when you have money so do this before you deplete your personal bank roll and you will be more likely to have what you need to whether the startup storm.
Michael Giuffrida from Southington CT has been operating businesses since 1997. He is an experienced entrepreneur in business management, profitable growth, business valuation, mergers and acquisitions, and information technology managed services.