Determining what your financial needs will be is important to do before applying for a Small Business Administration Loan. For new businesses, it is wise to estimate the costs of your business for the first several months. There is no absolute method to determining how much start up cost you will need. Each business needs are different and all will have different needs depending on the development stage they are in. Some businesses will require a considerable investment in equipment or inventory and some may be able to operate on a limited budget with little to no financial help.
When starting up a business, determine which expenses are a one-time cost (such as obtaining your Articles of Incorporation) and which will be an on-going cost (such as rent). Determine which of these expenses are optional or essential. A start-up budget should only include expenses that are necessary to start up your business. Once the essential costs are determined; combine the information into a worksheet for easy reference and have two separate categories: fixed and variable. An example of fixed expenses would be insurance, rent, administrative costs and utilities. Inventory, sales commissions and inventory are all variable expenses.
To calculate out your total start up costs, you will need to determine your initial expenses, money in the bank (as reserve for losses), start up inventory, other assets and long term or fixed assets. Adding all of these items together will help you determine what your total start up requirement is.
