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| Handling start-up costs and assets | |||
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Question:
First, can I include all start-up costs (legal, cash in bank, insurance, etc.) in the long-term assets portion of the start-up table. I would like to get one long-term loan for everything. How would a bank look at that request.
Last, our initial start-up costs and long-term assets are $28,500. How much capital isrequired on our part to secure a loan of this much? Is it accurate to assume 20% of the loan?
First off, I own Business Plan Pro, and I'd like to say it's a fantastic product. I am attempting to start a service organization, and I have a couple questions about bank financing.
Answer:
You're close, but here's the exact details. First, list those start-up costs as start-up expenses, in the upper portion of the start-up worksheet.
Start-up costs aren't assets, they are expenses, and they end up producing a loss at start-up. Don't worry about it, it's normal. You need capital or liabilities to balance those expenses, which is what goes on in the lower section of that worksheet (or in the Startup Funding table in the newer versions of the software).
Expenses are gone when the money is spent, and they become loss at start-up. Assets are still there when the money is spent. Examples are cash, inventory, and equipment and machinery.
Your assets are always equal to capital and liabilities, so you end up having to get either capital or liabilities to balance those assets. Experiment with it, look at your manual, and the F1 key context-sensitive help, and the sample files, and you'll see how it works.
I hope that helps,
Tim Berry
