FREE online courses on Business Plan Basics - The Essential Elements of a
Good Business Plan - Part 8 - Financials
The financials should be developed after you've analyzed the
market and set clear objectives. That's when you can allocate resources
efficiently. The following is a list of the critical financial statements to
include in your business plan packet.
If you own an established business, you will be requested to
supply historical data related to your company's performance. Most creditors
request data for the last three to five years, depending on the length of time
you have been in business.
The historical financial data you would want to include would
be your company's income statements, balance sheets, and cash flow statements
for each year you have been in business (usually for up to 3 to 5 years). Often
times creditors are also interested in any collateral that you may have that
could be used to ensure your loan, regardless of the stage your business is at.
All businesses, whether start-up or growing, will be required
to supply prospective financial data. Most of the time, creditors will want to
see what you expect your company to be able to do within the next five years.
Each year's documents should include forecasted income statements, balance
sheets, cash flow statements, and capital expenditure budgets. For the first
year, you should supply monthly or quarterly projections. After that, you can
stretch it out to quarterly and/or yearly projections for years 2 through 5.
Make sure that your projections match your funding requests.
Creditors will be on the lookout for inconsistencies. It's much better if you
catch mistakes before they do. If you have made assumptions in your projections,
be sure to summarize what you have assumed. This way, the reader will not be
left guessing.
Finally, include a short analysis of your financial
information. Include a ratio and trend analysis for all of your financial
statements (both historical and prospective). Since pictures speak louder than
words, you may want to add graphs of your trend analysis (especially if they are
positive).
