Common Startup Financing Mistakes to Avoid


Startups bring the hope of finally being financially independent – but it’s important to note that 9 out of 10 startups rarely make it past the first year of operation. That shouldn’t discourage you, though! Fact is, the problem is all on the financial side and with proper preparation on this aspect, you could be that 1 startup that managed to get past the odds! Here are typical mistakes that you should watch out for.

Too Fast, Too Soon

The reason why almost all startups fail – founders go too fast, too soon. Yes – you’re probably excited and all that, but please remember that there are some expenses you can do without. For example, do you really need a big office space when there are just three of you? Utilize what you have and keep the expenses at a minimum.

Common Startup Financing Mistakes to Avoid

This one is pretty common and actually very tempting for most business owners – but don’t do this! If you took an SME loan, then don’t grab a portion of that for personal use and vice versa. Sure, you can allocate some of your income for the business – but don’t go beyond that! You should have a good financial diary even before starting so you’d never have to dip in your personal pocket.

Common Startup Financing Mistakes to Avoid

A lot of people are good at developing products but the question is: will people buy your product? Is there a sufficient number of people to make that start up soar? Invest time and energy in market research because this is the very factor that decides whether you will continue or not. In fact, go the whole mile and do a feasibility study of your project. Figure out the projected sales, expenses, and whether you’d be able to turn profit during your first five years. Applying for a business loan in the Philippines usually needs an FS.

Common Startup Financing Mistakes to Avoid

No matter how accurately you check prices to figure out your predicted expenses, it will never be enough. This is why it’s important to have fund reserves just in case something goes wrong – because something always does when it comes to startups. Have a reserve that should be at least 20% of your total budget.

Common Startup Financing Mistakes to Avoid

Once you borrowed a loan from any bank, you should keep close track of the terms and conditions. You should have a payment plan for the loan, bearing in mind the interest rate you’re paying for. This is the single biggest expense of the business so there should be an allocated amount for the loan during your monthly operation. Actually, this relies on all loans done in line with the business. As much as possible, do NOT use plastic when buying for the business.

Common Startup Financing Mistakes to Avoid

Although you’re not required to have complete financial statements, it does help to follow basic accounting principles. Keep track of your assets, liabilities, and expenses to find out exactly where the money is coming from and where it’s going.

Of course, those are just few of the things you’ll have to keep in mind during starts ups. Remember: it’s supposed to be hard, so don’t give up too soon!

About the author: Sandy Garcia is a full time business analyst at eCompareMo, a complete online comparison portal for Filipinos looking for quick, secure, and complete banking and insurance information in the Philippines. She’s also working as a part time writer to various clients all over the world. Image provided by www.shutterstock.com

Leave a Reply

Your email address will not be published. Required fields are marked *