Creating a business out of your capital is a very impressive move, but without a financial assessment, your capital can not take your business to the desired state. Whether your business is in its early stage or seeking to expand, funding remains a constant need.
However, before you even begin to think of writing proposals to seek funding either from angel investors or venture capitalists, it is very important to identify why your business needs funding, and a clear breakdown of how the money will be spent. This is why a financial assessment is important.
This might be to expand to new locations, pay off business debt, hire new employees, or meet other business operations demands.
After you have gotten this part right, alongside the reasons why you need business funding, it’s time to assess the financial status of your business. Here are five financial assessments you should check:
- Liquid Assets: Liquid assets are assets that can easily be exchanged for cash. Even though all assets are valuable, not all can be sold for cash at the moment, without taking a loss on the sale.
Before you request funding for your business, take a stock of your available assets that can be invested in your business. To carry out this accurately, it is advisable to meet with your accountant or financial planner to get the current state of your liquid assets.
- Collateral: Your collaterals are money or properties that can be used as a guarantee that you will repay a loan.
It can be an asset of cash used to secure a loan. Evaluate your collateral, including your cars, properties, and even checking and savings accounts.
Before anyone can offer to fund your business, they will most likely request collateral to ensure you are a serious borrower and will be able to pay back the loan.
- Personal and Business Debt: This part is very important as it deals with your credibility and the amount of funding you can get.
Evaluate any personal or business debt you may have, including student loans, mortgages, or even car loans.
If you have personal debts, you can still bankroll your business by doing the following:
- Explore formal financing options
- Look for a cash-ready partner
- Cut down personal expenses where you can
- Consider other sources of funding
- Business Valuation: In most cases, investors request business valuation before they invest in a business. A business valuation is a process of determining the current worth of a business, using objective measures to evaluate all aspects of the business.
This includes equipment, inventory, property, liquid assets, and anything of economic value. After making these financial assessments, you can proceed to seek funding.