The idea of opening a small business could be an overwhelming one if you’re not organized, which is why it’s good to learn what steps should be taken before doing so, especially in relation to financing your loan. If you’re thinking of opening your own small business, now’s the time to get the information you need to make the process as efficient as possible.
The Planning Phase: What to Consider
The first phase of opening your small business should be your planning phase where you pool together ideas with your business partners to determine the best plan of action to take. There’s so much to consider when opening a small business, including whether you want to be a sole proprietorship, partnership or corporation.
Also, you’ll need to conduct research, write a business plan, come up with marketing strategies, register your business name, choosing your mailing address, get your tax ID, business license and sales tax permit (if applicable), come up with record-keeping strategies, determine where to conduct business (online, your home, commercial building) and much more. In other words, there’s plenty to consider.
Since a business is a money game, financing your business is a major consideration. When it comes to finances, you may need to look at how to get a loan, what types of mortgages you want to look at (if necessary), what bank accounts to acquire, advertising costs (including websites and Internet marketing) and more.
Since there are so many financial elements to consider when opening a business, let’s take a look at some obligations related to finances that you may have to think about along way:
- Getting a bank loan: If you want a small business loan from a bank, you will likely need to bring in financial statements, projections for your business moving forward and your business plan, so be prepared. Since you may be judged by your personal credit, if it’s not in good standing, now’s the time to repair your credit. Also, it’s good to learn about peer-to-peer lending, which could allow you to borrow from a lending group and may offer lower interest rates than a bank.
- Other financing vehicles: In addition to loans, you may need to find additional investors (friends, family, private sponsors) to help finance your company. It’s good to keep in mind that the lower your start-up costs are in the beginning phases of your business, the less debt you’ll have to worry about repaying later.
- Commercial mortgages: If you think you’ll want to run your business from a commercial property, you will need to apply for a commercial property mortgage. Your first step would be find your property then find a lender. Some costs you should consider for a commercial mortgage include a monthly mortgage, taxes, and even an application fee. Also, be prepared to show a lender financial statements, business and personal records, operating statements, bank records, tax returns and more.
- Bank accounts: Most all banks offer small business checking, savings and money market accounts, many with competitive interest rates to boot. What’s great about these accounts is that some may offer online banking and other features to help manage business funds. But keep in mind that there may be a minimum balance requirement to avoid service fees, so keep this, and whether the bank is FDIC insured or not, in mind when choosing where to keep your business funds.
- Advertising costs: When thinking about advertising, there is plenty to consider. For one, you will need business cards, stationary, brochures and of course, a web site. Also, as a new business, you may want to advertise your business’ launch with a promotion in your local newspaper, radio station or television station, as well as via social networks and press releases online.
- Hiring employees: If you decide to hire employees, the cost for their salaries, benefits (if applicable), taxes and more must be taken into account as you’re thinking of getting started.
- Taxes – In addition to managing local, state and Federal income taxes (including Social Security) taxes for your workers, you have your own business taxes to consider. A great place to learn more is on the IRS website.
Once you’ve made your plans and have your finances in order, you’re ready to open your doors. Now it’s time to see if all of your hard work and planning has paid off by the business you bring in. Of course, all the planning in the world can’t make a perfect business. It will be up to you to continue planning and organizing, as well as managing your day-to-day operations to create the successful business you desire.
More tips on small business planning at Go Banking Rates.