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Funding Request & Financial Information – How to Write a Business Plan : Part 5 of 8

Welcome to the second half of my eight part post series on creating an effective Business Plan. I’m sure you enjoyed the break over the weekend, but are anxious to obtain the rest of the information you need. So let’s get started.

The whole point of your Business Plan is to request money from investors and/or obtain a business loan through a bank. So, what would the Business Plan be without specifics on what funds your business needs? It’s one thing to request a dollar amount out loud, it’s another to specify exactly why you need that money and how it will be used. We’re certainly not talking about a few dollars here, so those that provide the funds to you want all the details they can get before making such a commitment.

Here’s what information you need to provide:

1. Now
What are your current funding requirements for your business? How long would those funds last? How will those funds be used?

2. Future
What are your funding requirements when those original funds received are diminished? When will you need it? What about five years from now? Ten years from now? What will you need then? And how will those funds be used?

3. Type
Identify what type of funding you are requesting, such as equity or debt, and the terms that you would like to have applied to any contract or agreement. If a loan is what you seek, explain how and when you intend to pay it back.

4. Strategies
List anything that will affect how the funds are used and what funds are needed. Do you foresee selling your business in 20 years? Do you want to franchise and branch out later? These sort of changes will definitely affect what funds you need and how they’re used.

This section is the means for backing up your funding request. It is where you provide the proof for the scenarios you just laid out. Keep in mind, however, that you cannot effectively develop this section of the Business Plan until all of the previous portions have been done. Only then will you have adequate information.

There are two portions of the Financial Section: historical and prospective data.

Historical Data
Obviously, if you have not yet started your business, then this portion does not apply to you. However, if you do have a business and are looking for funds to help your business grow, then you need to provide potential investors and lenders with the business’ financial history.

You will need to provide the following financial information for each year you have been in business (up to 5 years):

• income statements
• balance sheets
• cash flow statements
• tax returns
• a list of collateral available to ensure repayment of a loan

Prospective Data
This information is required for your Business Plan, regardless of how long you’ve been in business, if at all. Again, most investors and lenders are interested in seeing what your prospectus is for the next five years of your business. For each of those five years, you should include quarterly projections of the following (monthly for the first year):

• income statements
• balance sheets
• cash flow statements
• capital expenditure budgets

Be sure that your financial projections match your funding requests in the previous section of the Business Plan. Also, include a summarized analysis of the financial information you’ve provided, including ratios and trends that affected/may affect both your historical and prospective data.

Tomorrow we will cover the final three sections of the Business Plan packet.

Business Plan – Part 1: Overview
Business Plan – Part 2: Market Analysis
Business Plan – Part 3: Define Organizational Structure & Management
Business Plan – Part 4: Define Strategies, Service & Product Line
Business Plan – Part 5: Funding Request & Financial Information
Business Plan – Part 6: Executive Summary, Table of Contents and Appendix
Business Plan – Part 7: Common Business Plan Mistakes
Business Plan – Part 8: Obtaining a Business Loan

Related Small Business Buzz Posts:
Obtaining a Business Loan – How to Write a Business Plan : Part 8 of 8
Overview – How to Write a Business Plan : Part 1 of 8
Common Mistakes – How to Write a Business Plan : Part 7 of 8
Define Organizational Structure & Management – How to Write a Business Plan : Part 3 of 8
Executive Summary, Table of Contents and Appendix – How to Write a Business Plan : Part 6 of 8

By Michelle Cramer
Friday, August 10th, 2018 @ 12:04 AM CDT

Operations, Startup |