Learn how to calculate the expenses and cash flow needs for the business.

Most business owners must rely on investors or lenders to fund their start-up or expansion plans.  Start-up business owners will need to document their funding needs in a business plan.  Owners already in business may or may not need a business plan, depending on the nature of their expansion plans.

Start-up Financing

A business plan is the best tool to help you calculate your funding needs and document them in a way that will provide the investor or lender with the information they require.  The SCWBC has created a simple business plan template that includes the essential information you will need to start and run your business.  Completing the Sources and Uses and Projected Cash Flow worksheets in the business plan helps you get down on paper your thoughts as to how your business will progress each month for the first year.

The Sources and Uses worksheet is where you itemize all of the initial costs for your business.  This may include initial inventory, property purchases, initial marketing campaign, or any other one time costs associated with starting your business.  In effect, this answers the question, “How will you spend the loan amount?”  The last entry, Working Capital, is for funds to support your cash flow in the first few months of business.  Lenders usually expect this amount to be less than 10% of the total loan amount.

The Projected Cash Flow worksheet is where you list all of the ongoing monthly expenditures and sales for your business.  In the first monthly column, you put what you think sales will be that first month after the doors open, and what the business expenses will be.  Then for each month thereafter, you project what you think your sales and expenses will be month by month.  At the bottom of this worksheet, the totals show you when the business will begin to make a monthly profit and when the cash flow will turn positive.  As a general guideline, lenders expect to see the business making a profit within the first three to six months.  They expect that the owners will not begin drawing a salary until the business begins to show a profit.

If you are starting a new business, check out our tested and proven four step plan.  Our training courses will go over the business plan template with you step by step, including how to complete the financial worksheets.  Then a business coach will help you one-on-one as you complete different parts of the business plan, and assist you with all of your financial planning.

Business Expansion Financing

Business expansions generally fall into two categories – an increase in the existing business volume, or an expansion into a completely new product or market area.

If you have been in business at least two years and are seeking funding for an increase in business volume and/or facilities, you will need to complete a Sources and Uses worksheet (see the SCWBC business plan).  This worksheet explains how you will spend the loan amount.  It includes all of the one-time costs associated with launching the business expansion, such as initial inventory orders, one time marketing campaigns, facility expansions, etc.  The last entry, Working Capital, is for funds to support your cash flow in the first few months of expanded business operations.  Lenders usually expect this amount to be less than 10% of the total loan amount.

If you are expanding into a new product line or market area, you may need to write a business plan, including both the Sources and Uses worksheet and the Projected Cash Flow worksheet.  In this scenario, put the current business sales and expenses in the first month’s column of the Projected Cash Flow worksheet and put the new sales and expenses for the expanded business in the following columns.

If you are in business but have never written a business plan or completed financial worksheets before, our How to Start Your Business, Step by Step class will show you how to write a business plan; or you may choose to meet with a business coach to discuss your needs

Business Plan Templates

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