Finance is the major driving force for any business establishment. The concept, idea behind a startup can be amazing and creative, the team working on it may have the best qualifications and expertise, but to keep the business running and growing, money acts as a fuel. Based upon the asset investment and other financial commitments just the revenue earned cannot suffice the financial requirement of the company. An additional and constant source of monetary support is required all the time. Hence funding resources play a very relevant role to meet up the working capital and expansion plans of the company. There are various funding options available in the market. You can read more in detail about each one of them, their procedures, pros and cons and requirements through startup guide available on www.entrepreneur.com.
Let us now understand points in business when outside funding becomes handy:
Every new set up require seed money to meet up the necessary initial investments essential for the business like attaining incorporation and business license, insurance, workspace and facility, equipment and machinery, hiring and forming a workforce, marketing and distribution services and partnerships. Starting funds from an investor, or bank or owners saving account should be arranged to fund these essential requirements.
Before the company starts earning revenues on the manufactured product or services, a lot of investments goes into arranging for the production and maintenance of inventory and other hidden costs in the complete procedure. A hindrance caused in the production process due to the shortage of fund can cost a lot for the company in terms of revenue loss, losing the trust of the client and overall image of the company. In the initial years, the profits would be low. Hence the company would need constant cash flow to meet the expenses and liabilities until profits start flowing in.
Apart from the finances, it is the workforce and their expertise which make or fail the company. To get best from your employees, their monetary satisfaction is very much important. Best of the talent can also no sustain if the company fails to provide them regular remuneration. Therefore, to ensure smooth payroll outflow even in stressed company situation, funds are required.
Expansion plans and repairs
In every company’s business plan there is an expansion component which defines their growth plan and reachability in the market. The opening of any new branch or manufacturing unit can call for additional fund requirement. There is always a possibility of any unforeseen accident occurrence which may adversely affect the property and health hazard to the workforce. To tackle such crisis, emergency repair funds should always be available. Although the insurance settlement will take care of damages, the immediate requirement of general repair or replacement to keep the work going monetary support is required.
Also, the debt-equity ratio in the financial plan of the business defines the fund requirement of the company. Too much of debt compared to revenue and asset value can create an imbalance in the financial management of the company. To endure your credit records, stay clean, timely payment of all debt commitments is equally essential.