Starting a business requires entrepreneurs to take on various tasks, including the difficult task of obtaining seed funding. When you are seeking financing for your small business, your lender will likely ask you for various financial documents, including bank accounts, tax returns, personal financial statements, profit and loss statements, and a operating budget.
What is an Operating Budget?
An operating budget is a tool used to keep track of common expenses and overhead associated with running a business. This article will provide you with a sample operating budget that you can use as a guide in creating your own budget and some information on financing options for your business.
Wages / Salaries $
Payroll expenses $
Equipment leases (i.e. copiers, fax machines, telephone system, computers, etc.)
Licenses / Permits $
Insurance Insurance $
Attorney Fees $
Accounting fees $
Fees / Subscriptions / Fees $
Repairs / Maintenance $
Loan payments $
Other Expenses $
Please remember that this is a sample budget that is simply intended to serve as a guide to commonly incurred business expenses; do not forget to include the particular expenses of your business. For more information on starting, running or closing your business, you can visit the Small Business Law section.
Options for financing your small business
An operating budget is not only important to help monitor the performance of your business, but it is also the type of document that a lender will want to review before lending money to your business. There are a few options when it comes to financing your business. One option is to ask your friends or family to loan you their business money. This can be difficult, however, as mixing business and pleasure runs the risk of negatively affecting your relationship with family or friends. Depending on your personal financial situation, you can also contribute personal funds to your business. However, this can be risky, as there is no guarantee that your business will be successful, and you may not want to risk losing your own money.
If you do not want to risk your own money or personal relationships, you can apply for a loan from a bank or other type of financial institution. One source that offers a variety of loans is the Small Business Administration (SBA). The SBA offers four basic loan programs, each with its own eligibility requirements. Another common place to look for a loan is a commercial bank, which can offer favorable terms if you can show a good business plan and an operating history of a couple of years. A credit union is another good option when looking for a loan.
The procedure for borrowing funds from a credit union is generally easier than obtaining a loan from a commercial bank. Regardless of where you seek a loan, each will have their own eligibility requirements as well as a list of documents that they will want to review. However, chances are the potential lender will at least want to review your operating budget and his profit and loss statement.