Start up companies need to budget and prepare for debt

On Behalf of | Jul 17, 2018 | Business Law |

Entrepreneurs in Florida focus on their goals, but, realistically, debts will pave the path to their success. New businesses generally do not make a profit for three to five years. Until then, bank loans, credit cards and investors will supply the money to launch and operate a business. From day one, entrepreneurs must budget carefully and accept the inevitability of carrying debt for a time.

A startup budget involves the identification of all operating expenses, such as leases, wages, utilities, equipment and advertising. Amounts assigned to all categories should be well researched and as accurate as possible so that a business owner can establish spending limits and discover ways to control costs.

If money becomes tight during the startup phase, an entrepreneur needs to choose which payments to make first. Utilities, rent and payroll represent typical top priorities because not paying those bills could lead to an immediate catastrophe for a business. Although missing a loan payment will produce penalties, it will not mean the immediate failure of an enterprise.

Debt consolidation often helps entrepreneurs manage their payment plan. Instead of juggling multiple payments that hit at different times of the month, a business owner might find relief through a single loan payment for everything. Other cost control strategies include the delay of technology upgrades or buying used equipment instead of new.

A person might benefit from legal advice when launching a new business. An attorney who practices business law could recommend a business structure that might insulate the entrepreneur from personal liability. Since a startup often requires funding from multiple sources, a lawyer could provide insight into the terms of loans and how to structure agreements with investors. An attorney could strive to negotiate friendlier financing terms that might reduce costs long term.