The Financial Sections of a Business Plan

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Published: 06th February 2017
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When applying for a business loan, many lenders will require a business plan with some accompanying financial projections. Creating the financial projection section of a business plan can best be described as taking the written portion of the plan and turning it into numbers. It is the portion of the business plan where the rubber meets the road and determines if the business model is viable, sustainable, and adequately funded.

The primary financial sections of a business plan are as follows:

1) Statement of Financial Need - is used to determine the capital requirement for the loan and is also commonly used to populate the beginning balance sheet for start-up businesses. It is critical for your Statement of Financial Need to address all the capital requirements for starting or expanding your business. Many start-up businesses fail due to being under capitalized. They simply run out of cash before the business starts to generate positive cash flow.

2) Projected Cash Flow Statement (for two years and is broken out month by month) - it shows the projected revenue and expenses and examines how cash flows in and out of a company.

3) Projected Income Statement (for two years and is broken out month by month) - is similar to the Cash Flow Statement but also takes into account depreciation expenses.

4) Projected Balance Sheet - is frequently determined or produced by the Statement of Financial Need and is a picture of the fiscal situation of a company at a distinct moment in time. The standard business balance sheet has three parts: assets, liabilities, and ownership equity.

The process of creating the financial projection portion of a business plan starts with populating a Statement of Financial Need document with numbers or figures. This document determines how much capital you need, what the funds will be used for, and where the money will come from. Most startup companies tend to underestimate their launching capital requirements.

The Statement of Financial Need document is a terrific tool for calculating the total capital requirements for a startup business. Many lenders want this document included with the financial projection portion of the business plan because it provides them with the following information: owner injection percentage, percentage of the loan used for hard assets versus soft assets, total loan amount, and demonstrates the borrow has completed a comprehensive investigation of the capital requirements for the startup business as outlined in their business plan.

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