What Financial Statements Are Necessary for a Business Plan
A business plan contains a great deal of prose, but funders know that the numbers in the plan can make it or break it. These numbers are presented in three basic financial statements. For a startup business these documents are all “pro forma” meaning that they are projections of the future since no financial history exists for the company. If the business is already in operation, the financial statements can include past actual numbers, the present numbers as well as projected targets.
The three key financial statements for a business plan are the income statement, the balance sheet, and the cash flow statement.
Income Statement
The income statement, or profit and loss statement, shows the sales revenues, costs of doing business, other expenses, taxes, and profit (or net income) for given periods of time. For recently past periods and the next 1 to three years, the income statement generally shows quarterly numbers to give greater detail. Annual data is shown for up to five years in the future. The income statement shows the profitability of the firm, and ratios such as the profit margin (net income divided by revenues) can be easily derived from this statement.
Funders look to the income statement to see indicators like growth in the absolute level of sales, absolute level of net income, and profit margin (representing the company achieving greater efficiency at converting sales to profits).
Balance Sheet
The balance sheet, unlike the other two statements, shows snapshots of the financial situation of the company at given moments in time. At year’s end, for example, the balance sheet will show the value of assets, liabilities and owner’s equity (sometimes called shareholder’s or stockholder’s equity), drilling deeper into each of these categories as necessary. The word “balance” refers to the fact that the value of assets is always equal to the combined value of liabilities and owner’s equity, creating balance in the equation (A = L + SE).
Funders use the balance sheet in conjunction with the income statement to derive ratios such as return on assets, return on equity, and return on invested capital. These numbers show how well the assets of and investment in the company are being employed to create profits.
Cash Flow Statement
The cash flow statement, also called the statement of cash flows, shows the cash inflows and outflows of the business for given periods of time, much like the income statement. Unlike the income statement, all numbers are in cash terms and are generally divided into three sections, operating, financing, and investing, covering some transactions not recognized on the income statement. Operating cash flows represent cash brought in through sales and cash paid out for operating expenses and inventory. Financing cash flows represents cash brought in from lenders and investors and paid out to those funders when principal is repaid or dividends are paid back, for example. Investing cash flows show investment in additional assets for the company, such as the purchase of equipment or leasehold improvements on a rented facility.
Eric Powers is associated with Growthink, a business plan consulting firm. Since 1999, Growthink business plan writers have developed more than 2,000 business plans. Call 800-506-5728 today for a free consultation. If you’re writing your own business plan, you can access a proven template, here: http://www.growthink.com/products/business-plan-template.
Article Source:http://www.articlesbase.com/strategic-planning-articles/what-financial-statements-are-necessary-for-a-business-plan-1292821.html
Originally posted 2009-10-03 09:04:49. Republished by Blog Post Promoter
Best Alternative For Small Business Loans – Business Cash Advances
The topic of small business loans in the world today is a relatively large topic, primarily because of the fact that so many people are going to get business loans or alternatively want to get business loans in order to start a small business. While this is an admirable goal, a combination of current economic conditions and the general difficulties of getting a small business loan have made it a poor option for most people. Instead of getting sucked into a bad small business loan, there are alternatives that you can explore. One of these alternatives is a business cash advance and it compares very favorably to small business loans in a number of different categories.
Requirements
The requirements on business cash advances are a lot easier than on small business loans. For a business cash advance, all you need to do is have a track record of sales in your company, process credit card sales and get a minimum monthly amount of those sales in order to qualify for unsecured loans that the business cash advances represent.
On the other hand, small business loans require you not only submit all of your personal information in a process that seems designed to hassle at times, but you also need to have great credit and meet a lot of other minimum requirements as well. The only conclusion possible is that it is a lot easier to get a business cash advance than a small business loan.
Amount
Another big difference between these two types of loans is the amount of money that you can potentially get. Even if you are approved for a small business loan, you are not going to be able to get that much money unless your business is hugely profitable and the credit rating is excellent. Even for expansion, you would be lucky to get $100,000 in a small business loan. With business cash advances on the other hand, what people are beginning to find is that they can sometimes get as much as 5 times that amount. That’s $500,000, certainly an amount of money that would help you facilitate any plans for expansion your small business might have in the near future.
Repayment
Repayment is another huge issue. When you are involved in a small business loan, you are going to have to repay on a set schedule that essentially forces you to move money around in a way that might not be conducive to the way your business works. This in turn forces you to do things differently and that in turn could have negative effects on the cash flow situation of your particular business.
With a business cash advance however, the money to repay the loan comes directly from the processed credit card sales that your company has accrued. Therefore, all you have to do is simply set those sales aside for the repayment and then use your other revenue generators for the general expenses in your business. Repayment therefore is made extremely simple and that allows you to pull attention away from the loan and focus it on your small business where it belongs.
Author: Gaston Castro
Article Source: EzineArticles.com
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Seven Topics You Should Discuss with Your Accountant Every Year
Small business owners often use the New Year as a time to plan annual budgets and focus on sales growth and new business opportunities. But it’s also a great time to make resolutions to review accounting practices and financial controls on the business. This is especially true in 2010, as businesses are likely to face another economically challenging year.
“I find it helpful to set up an annual business review with my accountant,” says Steven Hastert, president of AccountingAisle.com. “That way we can review everything from cash flow planning, to tax updates to how another person views my business. I find it useful to get another perspective.”
Hastert says he prepares for this meeting in advance, with a targeted list of items to discuss with he company’s CPA. “Like most small business owners, I’m acutely aware that I’m paying for this time by the hour. I need to make the most of their time and my money.”
Here are the seven steps you should take to prepare for your annual accounting review:
- Review year end financial statements and compare 2009’s results to company’s previous performance. What has changed? Examine financials each month, but it’s important to look at trends over the year. Ask your accountant to review the information as well. Get a second opinion on the financial health of the business.
- Project cash flow for the upcoming months. This provides a road map for you to plan for upcoming business expenses, and helps you forecast sales and revenue. Forwards a copy of your cash flow report to your accountant for review prior to the meeting.
- Review pricing strategies. One way to improve profit is to increase prices for your goods or services. However, in our current economic environment, it could also cause significant loss of customers. An accountant might provide valuable insight into your current strategies and other factors to improve the company’s profitability.
- Inquire about changes in state, local and federal Tax Laws that will affect the business.
- Review accounting software packages. During this meeting, take the time to inquire about your accounting software. Is it time to upgrade to a new version of the software? Has your company outgrown its current marketing practices? Without asking this question, you’ll never know.
- Consider applying for a line of credit or changing merchant accounts. As a business owner you must prepare for emergencies, especially in uncertain times. While your company might not need access to a line of credit right now, it could in the future. It is easiest to establish credit when the business is not under duress, and your accountant might have a personal relationship with a banker that you should take advantage of.
- Is there anything else? Ask this open-ended question of your accountant. They might be able to get an insight you would miss otherwise.
The Accounting Aisle can help you find the right accountant for your business. They specialize in helping businesses maximize profits with accurate reporting and professional advice.
Article Source:http://www.articlesbase.com/strategic-planning-articles/seven-topics-you-should-discuss-with-your-accountant-every-year-1730326.html
Merchant Cash Advance – The Business Loan Alternative
The Capital Access Network recently surveyed 276 small business owners in the fields of restaurant/hospitality, health/medical, retail, service, etc, all of which accept specific credit cards within their businesses. 87% of the surveyed business owners feel that access to a readily available line of credit is important, especially in today’s economy. And although 76% of those business owners still feel that banks are one of the most trusted sources of capital, 42% feel that it is important to have a back up plan, in case the bank does not come through.
For a small business owner, there are many reasons why a bank would not approve a small business loan. These reasons may include poor personal credit history, low business cash flow and lack of collateral. A small business loan may also be denied if the business in question has not been in existence for three or more years. Therefore, a person who is just embarking upon his/her entrepreneurial journey, attempting to finance a startup business, is very likely to have difficulty finding a bank that will approve a loan. This has created a catch-22, producing a desire for alternative sources of small business financing.
87% of surveyed business owners who requested capital and were not provided these funds by their banks, stated that the banks did not offer an alternative method of funding, and 69% stated that they would consider an alternative had the bank proposed one.
Although many banks may not be offering alternative ways for small business owners to receive funds, there are other options. Many companies offer small business cash advances to business owners. A small business cash advance is similar to a loan, as owners are offered a large amount of money and required to pay it back to the lender. However, these cash advances are easier to obtain than bank loans. They have fewer requirements and utilize an automatic repayment plan where the lender deducts a percentage from each credit card sale until the cash advance is completely paid off.
These cash advances are specifically designed for small business owners who are unable to get approval for a bank loan, therefore providing the alternative that 69% of surveyed small business owners would have considered if offered.
According to a survey released by the Federal Reserve, many banks have admitted to tightening their lending practices over the past three months. Credit risks are increasing and the economy is weakening “…due to rising energy costs, turbulence in the secondary credit markets…and the anticipated impact of relaxed underwriting standards over the past few years…” sates the survey. The survey predicts these tightened practices to continue over the next year, possibly producing more potential seekers of small business cash advances.
Author: Gaston Castro
Article Source: EzineArticles.com
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Small Business Loans Alternative – Selling Points
Until recently, merchants had not been actively looking for an alternative to small business loans.But recently bank lending has dwindled and the recession’s steady grip on the employed, the unemployed and entrepreneurs alike, has sent business owners on a frenzied search for alternatives to small business loans.
Myriad magazines, newspapers and blogs, etc., have given advice about business loans alternatives, including angel investors, venture capitalists, and p2p lending, but one of the best small business alternatives is the merchant cash advance.The merchant cash advance is considered one of the best alternatives due to its multiple selling points, which are as follows:
Unsecured
Being able to get business funds with no collateral is an excellent deal, especially today.Small business owners enjoy the fact that with business cash advances, they can get up to $500,000 in unsecured business funds, which can be used with no restrictions.
Flexible
Flexible repayment procedures in which providers deduct a small percentage from borrowers’ daily credit card sales allows small business owners to focus on running their businesses rather than making fixed monthly payments.It also allows the actual payment amount to fluctuate (payments are lower when sales are lower and higher when sales are higher).
Minimal Requirements
It’s easy to qualify for a business cash advance.A merchant who has owned his/her business for at least six months, processes a minimum of $3,500 in monthly credit card sales, has at least one year remaining on the business lease and has no unresolved bankruptcies, can qualify for $5,000 to $500,000 dollars through a business cash advance.
Renewable
Merchant cash advance lenders allow borrowers to renew their advances when they’ve completed 60 percent of repayment.Renewing is fast, easy and convenient.
Get a free online quote today!
Author: Gaston Castro
Article Source: EzineArticles.com
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Who Cannot Use the Business Loans Alternative?
Business cash advances are a great alternative to the traditional business loan, but there are some small business owners who cannot take advantage of this method of business financing.
Home-Based Businesses
In order to qualify for an advance, the business loans alternative, a merchant must run his/her business out of a storefront/office. Why? Since merchant loans are unsecured and require no collateral, merchant cash advance providers are taking a big risk when they advance small business owners up to $500,000.
Merchants who operate from an office or store-front will usually have a business lease. A small business owner who is held to a lease is more likely to continue running his/her business until his/her advance is fully repaid.
Non-Merchant Businesses
One of the selling points of the business loans alternative is the flexible method in which it is repaid. Rather than requiring merchants to make monthly, out-of-pocket, fixed payments, providers deduct a small percentage from a business’s daily credit card sales. This procedure takes place for six to eight months, until the advance is repaid.
Non-merchant businesses who do not process credit card sales will not be able to partake in the repayment method that business cash advance providers use. Therefore, they are ineligible for advances.
Merchants with Unresolved Bankruptcies
Small business owners who receive merchant cash advances cannot have unresolved bankruptcies. Merchants who have filed for bankruptcy in the passed, but have resolved the issue may still be eligible for a business cash advance.
If you own a office/storefront business that processes credit card sales and you have no unresolved bankruptcies, the business loans alternative may be right for you. Get a free online quote today!
Author: Gaston Castro
Article Source: EzineArticles.com
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