Financial Statements You Will Need
You may need several different types of statements, depending on the requirements of your lender and your own technical expertise. The statements you will certainly need are:
A startup budget or cash flow statementA startup costs worksheetA pro forma (projected) profit and loss statementA pro forma (projected) balance sheet
Your lender may also want these financial statements:
Sources and uses of funds statementBreak-even analysis
Putting these Statements in Order
First, work on your startup budget and your startup costs worksheet. You’ll need to do a lot of estimating. Then work on a profit and loss statement for the first year. A lender will definitely want to see this one. And, even though it’s not going to be accurate, lenders like to see a startup balance sheet. Some lenders may ask for a break-even analysis, a cash flow statement, or a sources and uses of funds statement. We’ll go over these statements so you can quickly provide them if asked. Your lender wants to know your budget - that is, what you expect to bring in and how much to expect to spend each month. Lenders want to know that you can follow a budget and that you will not over-spend. They also want to see how much you will need to pay your bills while your business is starting out (working capital), and how long it will take you to have a positive cash flow (bring in more money than you are spending). Include some key information on your budget:
What products or services you are selling, including prices and estimated volumesKey drivers for expenses, like how many employees you’ll need and your marketing initiatives
A typical budget worksheet should be carried through three years, so your lender can see how you expect to generate the cash to make your monthly loan payments. Include:
Facilities costs, like deposits on insurance and utilitiesOffice equipment, computers, phonesSupplies and advertising materials like signs and business cardsFees to set up your business website and emailLegal fees licenses and permits
To create this statement, you’ll need to list all your sources to get your gross income over that time. Then, list all expenses for the same time. This statement gathers up all your sources of income, including shows your profit or loss for the year and how much tax you estimate having to pay. It’s usually shown as a graph with sales volume on the X axis and revenue on the Y axis. Then fixed an variable costs (those you must pay) are included. The break-even point marks the place where costs are covered. This analysis can also be useful for service-type businesses to show an overall profit point for specific services. If you include a break-even analysis, be sure you can explain it. To create this statement, list all your startup and working capital(on-going cash needs), how much collateral you will be bringing to the business, other sources of funding, and how much you need to borrow. Check all numbers for accuracy and consistency. Especially make sure the amounts you are requesting are specific and that they are the same throughout all the parts of your business plan.
