You can go to banks and other lending institutions and seek a business loan, or you can go in search of venture capitalists.
This information helps you determine how much financing your business needs and helps outsiders determine whether lending you money or investing in your business is a wise use of their funds.
You'll probably also want to note any personal seed capital your business has, or will have. Financiers want and often require entrepreneurs to put their own funds in the venture, and the greater the portion you commit relative to your net worththe better. You must also determine which type of financing would be most suitable for your business.
Banks offer several types of loans to businesses that do not present too much risk. Do you need a short-term working capital loan to increase your inventory? Do you want a transaction loan, with which you receive all the money at once, or a line of credit that lets you draw on funds as you need them?
Do you need an intermediate-term loan to purchase larger assets such as real estate or equipment? Or are you a high-risk business that needs to jump through the extra hoops required to secure a government-backed Small Business Administration loan?
Structuring Your Financial Plan Begin your financial plan with information on where your firm stands financially at the end of the most recent quarter what its financial situation has looked like historically.
Then lay out your goals with financial projections for the next three to five years, depending on what lenders or investors have asked for. These are called "pro forma" statements, and they are based on your assumptions about how your business will perform. Your one-year projections should be broken down by month, while your more distant projections can be broken down by year.
If your business plan is for the expansion of an existing business, your statements will be based on your business's existing financial data. If your business is new, your statements will be speculative, but you can make them realistic by basing them on the published financial statements of existing businesses similar to yours.
Three Key Financial Statements Your financial plan should include three key financial statements: Let's look at what each statement is and why you need it. Lenders and investors want to know what kind of numbers your company is working with and whether your company is profitable or expects to be soon.
Balance Sheet The Balance Sheet shows your company's assets and liabilities. It's called a balance sheet because the assets must perfectly balance the liabilities.
Within each category are numerous subcategories. For example, your assets will include cash, accounts receivable, inventory and equipment.
Your liabilities will include accounts payable, wages and salaries, taxes, rent and utilities, and loan balances. The Balance Sheetis important because it shows the company's financial position at a specific point in time, and it compares what you own to what you owe.
Topics you'll need to examine to predict cash flow include sales forecasts, cash receipts vs. How much will these expenses be, and how often will you need to pay them?
Will you have trade credit, and how long will you have to pay your suppliers? Cash flow statements not only show potential investors that you know what you're doing, they also help you to make sure your business model is financially viable and to establish goals that you want to achieve.
Your financial statements should show both a long- and short-term vision for your business. In business plans, three-year and five-year projections are considered long term, and your plan will be expected to cover at least three years. Your projections should be neither overly optimistic best-case scenarios, nor overly cautious worst-case scenarios, but realistic in-between projections that you can support.
Lenders may want your statements presented in a certain way, so ask before you draw them up.What makes up the heart of your business plan is the profit and loss (or income) statement, the balance sheet, and a cash-flow statement. If your business is a startup, these will all be projections, or pro forma statements.
If you're writing this for an existing business, then these statements will reflect your past business history and current . Aug 29, · How to Write a Financial Aid Statement. The financial aid statement is a simple, short piece of writing that students may include on a financial aid letter, in an essay, or in other communications to a financial aid department.
such as a College Savings Plan. For example, write something like this: “I have worked to help support 90%(12).
The Income Statement is one of the three financial statements that you need to include in the Financial Plan section of the business plan.
The Income Statement shows your revenues, expenses, and profit for a particular period. From all the kinds of statements, a business financial statement is what mostly considers to be a bit challenging. The reason is because it is a combination of numerical and verbal data and a computation is involved to get to a conclusion.
Jul 03, · The Key Elements of the Financial Plan. by This article will explain everything that you need to include in your financial plan so you get off to a good start. If you use the cash method of accounting in your business, your cash flow statement isn’t going to be very different from what you see in your profit and loss statement.
/5(25). The Financial Section, in many cases, is the most scrutinized section of your business plan. In short, it provides details on how potentially profitable the business will be, how much debt and equity capital is required for the business venture, and when debts are scheduled to be repaid to investors.