Understanding Small Business Financing — Tips from the SBA
Understanding the financing that will be required to start, manage and grow your small business is key to a successful start in the healthy snack vending business. The U.S. Small Business Administration (SBA) recommends these steps as you prepare to finance your healthy vending business.
Estimate Startup Costs
To determine how much money you need to start your vending business, you’ll need to factor in your fixed and variable costs. Fixed costs are one-time expenses such initial equipment investment, location assistance, business and licensing fees in your state. Also factor in ongoing costs such as inventory, gas, taxes and insurance. To get a realistic picture of startup costs, determine which costs are essential and which are optional.
It’s essential to have your personal finances in order before starting a small business. If you don’t have a business credit history, your personal credit history will be used to determine creditworthiness if you are seeking loans or other financing for your small business. A balance sheet of your assets, liabilities, equity, and net worth will help as you prepare your financial statements.
Developing Cash Flow
Cash flow is key for small businesses – you need it to start, operate, and grow your business. Cash flow includes:
• Inflow: the money that comes in from sales, loans and lines of credit
• Outflow: the money that goes out for business expenditures, such as inventory in the case of healthy vending
It’s important to balance inflow and outflow to maintain a reasonable balance of available funds at all times. Ask your accountant or contact your local SCORE office for more information.
Determine Your Break-Even Point
Your break-even point is when your small business is able to cover all operating expenses so it can begin showing a profit. Identifying startup costs helps determine the sales revenue needed to make this happen.
Borrowing money is common when it comes to financing a small business. But before you approach a lender, you’ll need to have the above steps in order, and a good understanding of different types of financing. Visit the SBA website to learn more about government-backed loans, using personal finances, and other tips to help you get started.