Login

Start-Up Budget: Definition & Example

An error occurred trying to load this video.

Try refreshing the page, or contact customer support.

Coming up next: Statement of Retained Earnings: Definition, Formula & Example

You're on a roll. Keep up the good work!

Take Quiz Watch Next Lesson
 Replay
Your next lesson will play in 10 seconds
  • 0:00 Definition
  • 0:37 Example
  • 2:20 Other Items to Consider
  • 2:51 Lesson Summary
Add to Add to Add to

Want to watch this again later?

Log in or sign up to add this lesson to a Custom Course.

Login or Sign up

Timeline
Autoplay
Autoplay
Create an account to start this course today
Try it free for 5 days!
Create An Account
Lesson Transcript
Instructor: Michael Cozad

Michael is a financial planner and has a master's degree in financial services.

This lesson will define a start-up budget. We'll look at an example budget from the perspective of a potential lender, along with a list of items to remember when building the budget.

Definition

There are numerous costs to take into consideration prior to establishing a business, and without the appropriate research, many items can be inadvertently left out. Prior to receiving funding for a loan from a bank or investor, it's common for parties interested in investing or loaning money to you and your new business to request an itemized list of income and expenses during an initial period.

A start-up budget is an itemized list of income and expenses for a new business, which often covers the period up to commencing operations and perhaps a small amount of time after operations have commenced.

Example

Think of it this way: your friend Kyle has approached you to loan them $5,000, since they're going to start a business that specializes in developing apps for smartphones. Before writing a check for $5,000 to Kyle and his new business, you would certainly like to know his start-up costs and how the business is going to make money in the future, right? You would like to see Kyle's start-up budget to know you have a good chance of getting your money back, hopefully with interest.

You request this list from your friend. Although you are the first potential lender Kyle has approached, he is one step ahead of you. He knows if he is to get the $20,000 he requires to begin the business, he needs to present this list of income and expenses to you prior to you writing him a check.

Kyle hands you this start-up budget for his first 90 days:

Sample Start-Up Budget
null

During those first 90 days, he doesn't anticipate any fees other than what is shown on his budget, since he's working out of his home. After 90 days, Kyle expects the app to be ready for sale. Are you prepared to give him the loan? He's offering to pay you $250 for your share of the loans as interest. One thing to keep in mind is that all the income that he will receive is also a liability to him and the business that will have to be paid back. Hopefully, after the app is listed, he can pay back the $20,000 in loans.

To unlock this lesson you must be a Study.com Member.
Create your account

Register for a free trial

Are you a student or a teacher?
I am a teacher

Unlock Your Education

See for yourself why 30 million people use Study.com

Become a Study.com member and start learning now.
Become a Member  Back

Earning College Credit

Did you know… We have over 95 college courses that prepare you to earn credit by exam that is accepted by over 2,000 colleges and universities. You can test out of the first two years of college and save thousands off your degree. Anyone can earn credit-by-exam regardless of age or education level.

To learn more, visit our Earning Credit Page

Transferring credit to the school of your choice

Not sure what college you want to attend yet? Study.com has thousands of articles about every imaginable degree, area of study and career path that can help you find the school that's right for you.

Create an account to start this course today
Try it free for 5 days!
Create An Account
Support