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Financing Your New Business | Intro

True or false? Most businesses fail because they lack adequate start-up capital. Sadly, it is true: before you begin your business you must have enough money and other "equity" that can be used to pay creditors or as collateral for loans to sustain you throughout the business cycle.

It is essential for the budding entrepreneur to plan wisely. How much money will be required to start the business? When computing this, be sure to include physical assets like computer equipment, monthly or yearly leases on a store, warehouse or factory, advertising and marketing costs, employee wages and benefits, and don't forget -- taxes. Even the simplest home-based business must be prepared to hand over at least 15% of its income in self-employment tax. Be sure to compute your full operating costs for at least the first year of business.

Do you have an adequate source of funding for your enterprise? Have you calculated your costs and projected income for the next five years? When do you expect to break even? Design a three-year plan of how you intend to become profitable, especially if you plan to eventually apply for a loan or attempt to solicit investors. In any case, it is a practical exercise that can give you a more comprehensive overview of what you need to do to succeed.

The U.S. Small Business Administration (SBA) offers an excellent guide to writing your business plan:

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Start My Own Business?

Choose a Legal Structure for My Business?

Write a Business Plan?

Finance My Business?

Lease and Locate my Business?

Purchase Business Insurance?

Arrange my Suppliers?

Obtain My Employer ID Number?

Obtain a Business Licence and the Proper Permits?

Learn About Business Taxes?

Keep Business Records?

Advertise and Promote my Business?

Hire Personnel and Contractors?

Learn About Labor Laws?