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Get a Handle on Capital

Jim Valete

By: Jim Valete

Whether you are taking over the family business or starting your own, the prospect of financing can make even the most fearless entrepreneur shudder—and with good reason. Lack of capital is a primary reason companies fail. While no one can guarantee success, a little advance planning goes a long way toward achieving economic viability.

Begin by understanding how much money you need for expenses until you become profitable and where to find additional financing should you need it. Many experts recommend new businesses have enough cash on hand to cover all expenses for a minimum of three months. To arrive at a preliminary budget, list the following obligations along with the estimated cost for each:

  • Your salary—all personal, non-business related expenses including food, utility, healthcare, insurance, transportation and other costs
  • Fixed business costs, including rent/mortgage, insurance and utilities
  • Employee salaries and/or wages
  • Marketing and advertising costs
  • Business supplies
  • Transportation

Take the total of these estimated costs and multiply by the number of months you estimate you will need to become profitable. Then, multiply that number by 1.25, which provides an extra 25 percent reserve for unexpected expenses. Remember, in addition to traditional commercial loans and lines of credit, talk to your lender for solutions available through the U.S. Small Business Administration.

At Busey, we take the time to understand your business and make credit and pricing decisions in a timely manner. Whether you are just starting out, need a loan to expand, or need help developing a strong succession plan, we’ll build a relationship so you don’t have to handle these decisions alone.

 

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