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How to Survive Financially When You Start a New Business

When you start a new position as an employee, you may have to spend some of your own money on work-appropriate clothing, such as business attire, steel-toe work boots, or skid-resistant tennis shoes. Your boss may also ask you to pay for certifications or licenses prior to formally hiring you. These expenses may seem high until you consider that the average business owner spends $30,000 to launch a new company. You may be able to start your business for just $3000 or so, but that figure might still make a major dent in your bank account. Keep reading to learn how to survive financially when you launch a new business (and for more in-depth reading, check out this ultimate checklist for starting a business).

Prepare in Advance

If you’re unexpectedly laid off or terminated by your employer, you may not have time to prepare for the expenses of starting a business. If you’re still working for someone else, use this time to quickly build up the balance in your bank account. Save up at least 6 months of business-related costs, and make sure you also have enough money to cover personal expenses for your mortgage, car insurance, utilities, and food during that time frame.

Not sure how much running a business is going to cost you? Here are some potential work-related expenses you may incur:

  • Rent
  • Utilities
  • Shelving or storage
  • Electronic devices, such as a laptop or smartphone
  • Cash registers
  • Decor if you’re not running a home business
  • Marketing/advertising
  • Transportation to meet with clients or contractors
  • Licenses and permits
  • Business insurance
  • Supplies if you plan to offer tangible goods
  • Payments for freelancers who help you launch your business

This is just a small sample of expenses you may rack up when you begin your journey toward self-employment. Your business may have additional costs not listed above.

Apply for Assistance

You don’t have to fund your business entirely from your own savings unless you have the means or desire to do so. The U.S. Small Business Administration publishes updated information about grants, loans, and venture capital that helps qualifying self-employed individuals launch their companies.

Confused about the different types of financial assistance? Grants are typically need-based payments that do not have to be repaid. In some cases, the grant distributor may hold you liable for the repayment of funds if you break terms in your agreement.

Loans are funds that you must repay, and you generally need good credit to qualify for this type of assistance. The issuing agency will give you a contract that clearly defines that specifics of your loan. You will receive information about interest owed, if applicable, as well as repayment terms. You can combine loans with grants if your creditors say it’s okay.

Venture capital often comes from investors who are interested in your business. It’s known as a form of equity financing, which means investors own a portion of your business. This is a good option if you plan to become profitable quickly or you anticipate a high revenue.

Consider a Credit Card

You may already have a few personal credit cards in your wallet, but were you aware that small business owners can also get cards? NerdWallet says Capital One Spark is best for business owners who don’t have perfect credit, while Ink Business Cash from Chase is ideal for folks hoping for a 0% APR rate. One benefit of a credit card is that it may help you track business expenses, which can come in handy at tax time.

If you decide to get a business credit card, keep an eye on your interest rate, and be careful not to charge things you don’t need. It’s also essential that you keep personal purchases off of your business account and make sure you only use the card for career-related expenses.

Starting a business can get expensive, especially if you aren’t generating a profit during your first few months. Plan for your company’s financial future by making smart decisions regarding money management.

Guest post by Jason Lewis: Jason Lewis is a personal trainer and caregiver to his elderly mom. He enjoys sharing his fitness knowledge on his website.

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Categories: Strategies.