| Trying to get a business loan, the lender will require | | | | is similar to the profit and loss statement with a lot of |
| among other things a business plan. One should not | | | | the same categories. However, a cash flow statement |
| panic, there are plenty of resources on the web and | | | | accounts for loan payments (principal), owners draw, |
| off-line that can help. Really, a business plan is just a | | | | and capital purchases, but not depreciation or |
| plan that shows the lender one has done their | | | | write-offs. Essentially any cash transaction is |
| research and developed a reasonable plan to make | | | | accounted for, so a company's liquidity is being tracked. |
| their business a success. The primary difficulty with the | | | | Its goal is to point out when a business will need cash |
| business plan is the financials. Even experienced | | | | or be cash rich. |
| entrepreneurs sometimes have trouble with their | | | | The final financial is the balance sheet. Everyone talks |
| financials. The following is a quick synopsis of what the | | | | about a balance sheet being a snapshot in time about |
| three financials in a business plan are in relation to a | | | | a company's health. The balance sheet totals the |
| business. These financials are an income statement, a | | | | company's assets and liabilities. It also tracks the |
| cash flow statement, and a balance sheet. | | | | owner's equity by placing it with the liabilities, this |
| The income statement is also known as a profit and | | | | provides a way for the two categories to balance. |
| loss statement (P&L statement). The intent of an | | | | When totaled the assets and liabilities with owner's |
| income statement is to show how much net profit the | | | | equity should equal each other. What one finds with |
| business is or will be generating. It may be one of the | | | | this financial is where the business capital and liabilities |
| simplest of statements because it calculates first a | | | | are placed. It may not be too good if a business's |
| business's gross profits. Gross profit is revenue minus | | | | assets are primarily in accounts receivables or |
| cost of goods. Then the statement begins to account | | | | equipment. Or the liability column is too heavy in the |
| for the other business expenses like payroll, rent, | | | | owner's invested capital showing little capital coming |
| utilities, advertising, etc. Once that is calculated and | | | | from revenue. Regardless, a balance sheet is a |
| subtracted from gross profit, it leaves the net profit. | | | | company's momentary report card. |
| This will be an important figure for a lender. | | | | When writing a business plan one should not be too |
| The next financial is the cash flow statement, which | | | | afraid of the financials. Once the planner understands |
| essentially shows how cash is flowing in and out of | | | | what they are trying to show, the numbers will come |
| the business. It can be argued the cash flow statement | | | | naturally to complete the plan. |