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Small Business Loans: How Much Do You Need?

Start up costs is one of the largest expenses that any business has to undertake and often those funds come from a small business loan. Even if you have the capital available, many business owners finance their start up costs in order to keep cash easily available throughout the next months. Determining how much you need to borrow in start up costs really is different for each type of business and even individualized businesses. You’ll need to determine how much money you’ll need for the first several months at least.

How Much Do You Need?

Some businesses do just fine with only a small amount of initial cost. You may not need to invest in pricy equipment or a large amount of property. On the other hand, other businesses need a rather large amount of money either to purchase equipment or space or even to purchase inventory. Before even starting your business, consider if you have access to enough money based on what your needs are.

Then, you have to determine your start up costs. To do this, you’ll need to do some hard number crunching. All of the expenses that you will have during those first months needs to be taken into consideration. There are two types of expenses to take note of. First you have expenses that will be your reoccurring expenses, which will need to be paid over and over. You also have one time expenses which are generally paid at the beginning of your business venture. In reoccurring expenses, these include things like your inventory, the utilities on your property and even the insurance that you pay. In one time expenses, think of things like the purchase of your equipment or even the investment of repairs on your property.

Another consideration you must make is a decision about whether the cost is a necessary need or if it is something that is optional. While it would be nice to have these additional items, it may not be required. During your initial run through of cost, only those costs that are necessary to opening your doors should be considered. Then again, you can divide these into two types. You have fixed expenses which are going to cost you the same thing month in and month out. In addition, you have variable expenses that will differ depending on your usage and purchase.

Examining these costs for your business can help you to determine how much start up money you need from a small business loan. Carefully consider each option so that you can secure enough money but not so much that you can’t afford to pay it back.

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