Financial Statements for Business Plans and Business Startup

You're working on a great business plan for your business startup, to take to a bank or other lender. A key part of that plan is the financial statements. These statements will be looked at carefully by the lender, so here are some tips for making these documents SELL your business plan! 

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
  • A startup costs worksheet
  • A pro forma (projected) profit and loss statement
  • A pro forma (projected) balance sheet 

Your lender may also want these financial statements: 

  • Sources and uses of funds statement
  • Break-even analysis

Putting these Statements in Order

First, work on your startup budget and your startup costs worksheet. It's tough because you must do a lot of estimating. The trick is to underestimate income and overestimate expenses. 

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 meaningless, lenders like to see a startup balance sheet. 

The other statements - the break-even analysis and the cash flow statement - are good to have, but if you run out of time, you can provide these later.  Depending on what you are selling, your lender may require these statements, so it might be good to have them ready. 

Create a Business Startup Budget

 A startup budget is like a projected cash flow statement, but with a little more guesswork.

It's a good idea to do a budget for startup even if you don't need a startup loan.

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).  Sometimes this budget is called a "cash flow" statement.  A typical budget worksheet should be carried through three years, so the lender can see how you expect to generate the cash to make your monthly loan payments.

Startup Costs Worksheet

This worksheet answers the question "What do you need the money for?"  In other words, it shows all the purchases you will need to make in order to open your doors for business.  I call this a "Day One" statement because you'll need all of this stuff the first day of business. 

Make sure you have included every cost; it is better to over-estimate what you will need so you don't come up short with the money you receive from your loan.

Profit and Loss Statement/Income Statement

After you have completed the monthly budget and you have gathered some other information, you should be able to complete a Profit and Loss or Income Statement projecting your income for the first year. 

This statement shows your profit for the year and how much tax you estimate having to pay. This is an important statement because it shows how soon your business will have enough income to pay its bills. 

Break-Even Analysis

A break-even analysis shows your lender that you know the point at which you will start making a profit.  While the break-even analysis is primarily for businesses making or selling products, it can also be useful for service-type businesses.  Be sure to include a break-even graph, and be able to explain i

Beginning Balance Sheet

Although this statement is usually complicated, at startup there isn't much to include.  You might want to get help from a CPA for this one.  The balance sheet shows the value of the assets you have purchased for startup, how much you owe to lenders and other creditors, and any initial investments you have made to get started. The date for this spreadsheet is the day you open the business.

Sources and Uses of Funds Statement

Large businesses use Sources and Uses of Funds statements in their annual reports, but you can create a slightly different simple statement to show your lender Lenders  exactly how much you need for startup and working capital (on-going cash needs), how much collateral you will be bringing to the business, and how much you need to borrow.  In other words, how much you need and what do you need it for.

Optional: A Business Requirements Document

 A business requirements document is similar to a proposal document, but for a larger, more complex project or startup. It gives a complete picture of the project or the business plan. It goes into more detail on the project that will be using the financial statements. 

Include Financial Statements in Your Business Plan

You will need a complete startup business plan to take to a bank or other business lender. The financial statements are a key part of this plan. Give the main point in the executive summary and include all the statements in the financial section. 

Finally, Check for Mistakes!

Before you submit your startup business plan and financial statements, check this list. Don't make these common business plan mistakes!

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.