Академический Документы
Профессиональный Документы
Культура Документы
I N T R O D U C T I O N
Planning is your map to success THE PLAN helps you find hidden
in the business world. You need to business flaws and makes you
write a business plan if you are: think carefully about each phase
of your business.
• starting or buying
a business
It is important that you write
• financing or refinancing
your business plan. Why? You
your business
will gain in-depth knowledge
• raising debt or
about your business which will
equity capital
make it easier to answer lenders’
Much money is made then lost questions. The process of writing
because one area of a business your business plan will clarify
fails, dragging the positive parts what is involved in making your
down with it. business work successfully.
Design: © NewGround Publications. (Phone: 800 207-3550) Text: © John Nelson & Karen Couto. All rights reserved. Photocopying any part of this book
is against the law. This book may not be reproduced in any form, including xerography, or by any electronic or mechanical means,
including information storage and retrieval systems, without prior permission in writing from the publisher. 0208
How To Business Loan Basics
ASK YOURSELF THESE QUESTIONS:
Use This •
•
How much money do I need? ______________________________________
What type of lender do I need? (bank, state or federal agency, venture
capitalist firm, or other investor) ______________________________________
Workbook •
•
What is the lender’s minimum and maximum loan size? ________________
Can the lender meet my present and future needs? ______________________
• What types of businesses will the lender finance? ______________________
Divide your business plan into
• What collateral does the lender accept? ________________________________
sections that match the “contents”
outline shown on the next page.
There is no set length for your LENDERS USE THE EIGHT “C’s” RULE:
answers — they will range from
1. Credit (must be good)
a paragraph to a few pages long.
2. Capacity (ability to repay)
Once it’s written, your business 3. Capital (money going into the business)
plan will need editing. Ask other
4. Collateral (your assets that secure the loan)
people to read and critique your
plan. Include a statement on the 5. Character (you)
inside cover that says its contents 6. Conditions (economy, finances, anything that affects your business)
are confidential, and making
7. Commitment (your ability and willingness to succeed)
copies is prohibited.
8. Cash Flow (can it support the business’ debt and expenses?)
Your business plan should be
neat and organized to make a
BASIC QUESTIONS A LENDER WILL ASK YOU:
professional impression. Write text
in a word processing program that • How much money do you want? ____________________________________
will point out misspellings and • How much are you investing in the business? __________________________
grammatical errors. For financial
data, use a spreadsheet program. • How will the loan be used? __________________________________________
• How long do you need to repay the loan? ____________________________
Once you’re done, make copies • How will the loan be repaid? ________________________________________
for your lender and for others who
• What collateral do you have to offer? ________________________________
are interested in your business.
Make sure all the copies you submit
are readable and include original BEFORE MEETING WITH A LENDER:
signatures. Lenders keep your
presentation even if you are • Call to find out the rules for their business loans.
rejected, so make copies for • Make sure the lender is looking for loans of your size and type.
yourself of everything you submit. • Ask for a loan application.
Number the business plan copies
and make a list of who you’ve • Make an appointment.
given it to. • Rehearse your presentation.
• Remember, the lender is like a customer. You have to convince
It’s a good idea to put your loan
presentation in a 3-ring binder the lender that your business has merit.
with tabs and indexes.
C O N T E N T S
Business Loan Basics
BREAK YOUR BUSINESS PLAN
WHEN MEETING WITH A LENDER:
DOWN INTO SECTIONS
• Bring your business plan, a completed loan
SIMILAR TO THIS BOOK.
application, and any other materials you need.
• Invite your lender for a tour of your current or proposed operation. Business Description ..........8
• Find out when you can expect a decision. Operations & Location . . . . . . . 11
Buying a Franchise . . . . . . . . . . . 17
The Appendix Loan Request . . . . . . . . . . . . . . . 18
The APPENDIX comes at the end of your business plan and includes
all details and documents that support the plan. F I N A N C I A L S TAT E M E N T S
Throughout this workbook, items that need to be included in the
APPENDIX are mentioned. On page 31, you’ll find a comprehensive General Information . . . . . . 19
list, which you can use as a guide.
The first page of the APPENDIX should be a listing of its contents. Personal Finances . . . . . . . . 20
Be sure to separate and organize the documents logically, perhaps in
the order they are referred to in the plan.
Balance Sheet . . . . . . . . . . . 22
The APPENDIX will grow, so it is a good idea to use a 3-ring binder
with tabbed dividers. Some people prefer using an expandable file.
Income Statement . . . . . . . 24
Cash Flow . . . . . . . . . . . . . . 26
Generally, lenders like to simplify the process
FORMULAS
used to screen loan requests. Take your Ratios . . . . . . . . . . . . . . . . . . . . . 28
EXECUTIVE SUMMARY
The Executive Summary (your Cover Letter) The Executive Summary should include:
briefly explains the rest of your business plan • the owners’ names and their credentials
in about one or two pages. • your products or services
• your market(s) and the competition
Page two is the Table of Contents. It shows • the amount of money needed
the lender on which page each section can be • how the loan will be repaid
found (see page 5 for the breakdown of sections). • how long you want the loan to last
date______________________________________________________________________________________________________
your address______________________________________________________________________________________________
___________________________________________________________________________________________________________
___________________________________________________________________________________________________________
The market for this business... (include one brief paragraph about the industry and its growth)
________________________________________________________________________________________________________
________________________________________________________________________________________________________
________________________________________________________________________________________________________
________________________________________________________________________________________________________
Our target market is... (include one brief paragraph about your target market/customers)
________________________________________________________________________________________________________
________________________________________________________________________________________________________
________________________________________________________________________________________________________
The competition includes.... (include one brief paragraph about your competition and how
your business will attract their customers)
________________________________________________________________________________________________________
________________________________________________________________________________________________________
________________________________________________________________________________________________________
________________________________________________________________________________________________________
________________________________________________________________________________________________________
We are investing $___________ of our own money. Our collateral consists of business assets
having a fair market value of $__________________ and personal assets (if applicable)
with a value of $__________________
Attached is our business plan which backs up our request. If you have any questions, please contact
(name) __________________ at __________________ (include phone number).
Sincerely,
__________________ __________________
Your signature(s) and printed name(s) here
8
BUSINESS DESCRIPTION
GENER AL Owners:
General:
Name: MRJ Design List each owner’s name,
List the business name, Address: 21 Longwood Drive, Orlando, Florida 32751 business title, home
location, mailing address, Phone: (407) 123-4567 Fax: (407) 123-4789
E-mail: smith@MRJ.com, Web Site: www.MRJ.com
address, telephone number,
telephone, fax, e-mail
and social security number.
and web site address. OWNERS:
Bob Smith: 10 Brookfield Rd., Orlando, FL 32751 Include a brief description
Phone: 407-456-7891 Social Security: 367-89-7088 of owners and managers
Over 20 years of experience in creative management. Worked
(experience and credentials
Legal Business for several design firms. Mr. Smith owns 60% of the business.
Linda Jones: 96 Elm St., Orlando, FL 32751 in running the business) and
Description: Phone: 407-567-1234 Social Security: 234-56-7891 their ownership percentage
Sole proprietorship, part- Ten years of experience as manager of large of the business.
nership, limited liability, marketing communications department within
Fortune 1000 corporation. Ms. Jones owns 40% of the business.
“C” or “S” corporation.
List the state where the
LEGAL STATUS: Florida S Corporation
business is incorporated.
PURPOSE: Produce superior marketing communications material for Business Status:
other businesses.
New/start up, ongoing,
Purpose: Describe the
expansion, or buying
intent of your business. STATUS: Start-Up.
a business. Include the
BUSINESS TYPE: Service date your business started
Type of business: or will start. If buying
Retail, wholesale, PRODUCTS AND SERVICES: Graphic design, illustration, and artwork a business, include a
production. Other services, supplied by vendors/suppliers, include detailed business history
service, manufacturing, writing, photography, printing, and mailing services.
contracting, professional, in this section.
importing/exporting. REASONS: Both partners have over 30 years of industry
experience that will be put to profitable use in our own firm.
The demand for graphic communications is ...etc. Reasons for starting,
buying, or expanding
business.
Goals: GOALS:
Include both current and CURRENT: Bring to profitable status that will equal or exceed
long-term projections. current income levels. Create relationships with clients.
Build ...etc.
LONG-TERM: In four years, we will have 50-100 clients.
Hire administrative person ... etc.
Industry: INDUSTRY:
Talk about what’s going 100 design firms and designers exist in our territory. Advertising
on in your industry, agencies (about 235) are also competitors but their specialty is
including economic not design. Many companies have relocated to Orlando so the Professional
demand for our services is growing. The number of start-up
trends, outlook, growth Relationships:
companies numbered 6000 last year...etc.
patterns and forecasts. Include name, address,
Keep this section short. PROFESSIONAL RELATIONSHIPS:
and telephone/fax
Explain more fully in ACCOUNTANT: numbers for your
your Marketing section. Larry Stuart, CPA, 123 Main St., Winter Springs, accountant, attorney,
FL 32751. Ph: 407-678-9012, Fax: 407-678-7890 banker, insurance agent,
ATTORNEY: and professional
Linda Johnson of Johnson and Smith, 456 Elm St., advisor(s).
Winter Park, FL 32789.
Ph: 407-234-5678, Fax: 407-345-6789
BANKER:
John Nelson, Heritage Bank, 678 Oak St., Orlando,
FL 32908. Ph: 407-123-4567. Fax: 407-0987-6543.
INSURANCE AGENT:
Linda Doe, Doe Insurance, 321 Grove Ave., Winter Park, FL
32789. Ph: 407-432-7654. Fax: 407-876-5432
PROFESSIONAL ADVISORS:
Claire Velleca, Velleca Consultants, 1 Park St.,
Orlando, FL 32701 Ph: 407-222-1456, Fax: 407-419-1989
9
BUSINESS DESCRIPTION
GENERAL OWNERS
Business name ________________________________________________ Provide the following information for each principal in the company.
Location ____________________________________________________ Name ________________________________________________________
Mailing address ______________________________________________ Business title __________________________________________________
Phone number___________________Fax __________________________ Home address ________________________________________________
Tax identification number ______________________________________ Telephone number ____________________________________________
E-Mail address ________________________________________________ Social security number __________________________________________
Web Site address ______________________________________________
Include a brief description of owners and managers (experience and
PROFESSIONAL RELATIONSHIPS. credentials in running the business) and their percentage of ownership
Include name, address, and telephone/fax numbers ______________________________________________________________
Accountant __________________________________________________ ______________________________________________________________
______________________________________________________________ ______________________________________________________________
______________________________________________________________ ______________________________________________________________
Attorney ____________________________________________________ ______________________________________________________________
______________________________________________________________ ______________________________________________________________
______________________________________________________________ ______________________________________________________________
Banker ______________________________________________________ ______________________________________________________________
______________________________________________________________ ______________________________________________________________
______________________________________________________________ ______________________________________________________________
Insurance agent ______________________________________________ ______________________________________________________________
______________________________________________________________ ______________________________________________________________
______________________________________________________________ ______________________________________________________________
Professional advisor(s)__________________________________________ ______________________________________________________________
______________________________________________________________ ______________________________________________________________
______________________________________________________________ ______________________________________________________________
State. What state is your business organized in? What states will you operate in? ________________________________________________
To Do Done To Do Done
• How many departments and managers • How many part-time and full-time employees
do you need? What are their functions? are needed to run the company? It’s a good
To Do Done
Two office staff: One full-time customer service representative and one • Some functions can be
full-time administrative assistant. Each will be paid $25,000 annually.
They will receive health insurance, ten paid sick days, paid holidays, outsourced. The monthly
and two weeks of vacation. These benefits will cost ...
cost for this service is
Operations
included in the APPENDIX.
JOHN SMITH
20 years of operational experience in landscaping industry . Smith will For example, you can outsource
supervise the grounds staff and handle ...
a direct mail program to a
Four (4) full-time grounds employees starting at minimum wage for marketing firm.
working Monday- Friday, 7:00 a.m. to 3:30 p.m. A two-day training pro-
gram is required before joining the company. Employees will receive
paid health insurance, five paid sick days, paid holidays, and one week
of vacation. These benefits will cost ...
11
O P E R AT I O N S & L O C AT I O N
To Do Done
HOW WILL YOUR BUSINESS OPERATE? of the deed in the APPENDIX. If leased, the term of
• How will the product be produced and sold? the lease must be renewable to match the loan period
To Do Done
How will your services be rendered? you are requesting. Include a copy of the lease (or
• What months, days, and hours will your proposed lease) with terms, conditions, length, and
business be open? Is the business seasonal? cost in your APPENDIX.
If so, show how you will adjust your time, U Are improvements, renovations, furniture,
To Do Done
schedule, inventory, and personnel. fixtures, equipment or machinery necessary?
• What furniture, fixtures, equipment and Show quotes in the APPENDIX.
machinery is needed? Will it be bought, leased, U Retailers:
or rented? Include proposed purchases in your > Research and show traffic patterns in the
APPENDIX. APPENDIX.
> What other businesses are in your
SUPPLIERS immediate area?
U Wholesalers, manufacturers and other businesses:
To Do Done
U Does this location affect your costs? The five-year lease we have signed on a 1,500 sq. ft. building
U How much are utilities, taxes, and is included in the Appendix. The building is located within
15 miles of 22 private and parochial schools who
other expenses?
U Is it easily accessible?
require uniforms that we will stock. Our building is on a major
thoroughfare, conveniently located right off Highway 93.
Is public transportation available?
Is there adequate parking? A floor plan of the building is included in the Appendix. We have
U Does your business comply with divided the area into retail space and warehousing/office space.
700 sq. ft. will include retail displays, three dressing rooms,
zoning laws?
U Do you own or lease the building? Include
restroom facilities and two purchasing counters. The remaining
800 sq. ft. will warehouse stock. It includes a delivery receiving
zoning statements from local government in
area, two offices, and a small employee lounge with restroom.
the APPENDIX and approval letters from local The 20-space parking lot is adjacent to the building.
and state inspectors. If owned, provide a copy
12
MARKETING
MARKETING has been defined as “the activity of audience for your dollar. When putting together your
presenting products or services to customers and business plan, include advertising ideas, schedules and
potential customers which makes them eager to buy.” budgets in the APPENDIX.
Especially in today’s crowded marketplace, where • Direct Marketing means contacting prospects by
competition is fierce, savvy small business owners should traditional mail, email or phone. Take, for example, a
never underestimate the power of smart marketing. nature camp company that wants to mail out brochures.
The right product or service at the right price is only the Buying a list of subscribers to an outdoor magazine
beginning. You must also identify your audience, promote seems smart. But measuring results is key. Say you mail
your product and find the best distribution method. 5,000 postcards and get 100 responses. That’s a 2%
response level. Of those, how many turn into orders or
THE PRODUCT OF ALL YOUR HARD WORK become clients? Keeping track of these things helps you
First and foremost, believe in the success potential of determine which databases are best, and how much it
your product or service. Then think about things like: costs to gain an order or client.
• Benefits of your product. If you’re not clear on them, • Public Relations (PR) is more than getting publicity.
no one else will be. It’s a great way to build an image or a brand identity.
• Research and development. Will you need it? If so, Through your business activities, you influence the
include detailed plans and costs in the APPENDIX. attitudes of your audience. For example, your company
• What licensing requirements, restrictions, registrations makes sunblock, so you sponsor a sandcastle contest at
or regulations affect your business? the beach. In order to get publicity — media coverage
• What about legal issues? Are there patents, copyrights or at no cost to you — you send press releases with
trademarks to think about? What are the costs involved? pertinent information well in advance to area
newspapers, radio and TV stations.
THE PRICE IS RIGHT • Promotional/Sales Material rounds out the
Determining just the right price for your product or marketing picture. Items like a logo, a catalog, a price
service is a delicate matter. Keep in mind that: list, and business cards can position you as a polished
• The price will be affected by the quality of your product, marketer, helping the sales process go more smoothly.
customer demand and the competition (see page 15). Think about what promotional materials you’ll need
• The selling price must cover all your operating expenses and what they’ll cost. Include samples, costs and ideas
(materials, labor and overhead) and also include a in the business plan APPENDIX.
margin of profit. To determine what this is, you need • Trade Shows can be a great way to get your product
to calculate your breakeven point (see page 30). in front of people, to get leads and take orders. Shows
can be a great place for your sales force to meet your
PLAN TO PROMOTE, THEN PROMOTE YOUR PLAN customers in person. In addition, it’s a chance for you
Your promotional plan will be implemented with several to talk with others in your industry and share
marketing tools. These days, a web site is an increasingly information. Many times, trade associations are present
important piece of the promotion pie. In addition, there at shows, presenting an opportunity for you to gain
are a handful of proven methods for promoting your valuable insights.
product, such as:
• Advertising tells your target market about your FULL SALES AHEAD
product or service. But how do you approach it, with • Who will sell your products?
so many choices available? Which publications are best? • Can you do it yourself or will you require a sales staff,
Is radio and TV advertising where you should be? reps, agents, brokers or wholesalers?
Researching web sites is a good place to start your • Think carefully about their compensation — will they
advertising plan. Ask professional organizations for work for a salary, commission, or both? Include
referrals when looking for designers and writers to help sales expenses in the APPENDIX.
develop ads. Media buyers help you reach the biggest
13
MARKETING
KNOW YOUR CUSTOMERS
• It is crucial to figure out who is MISS HARRIET’S SOUTHERN KITCHEN
most likely to use your product
MARKET
or service. These important 40,000 potential customers who live and/or work in
group or groups are your market or markets. Chicago’s North End.
• In most cases, slicing your market into smaller groups
CUSTOMER PROFILE
(called segments) is helpful in targeting them. For Male and female, ages 18 – 85, singles, couples and
example, if your product is gourmet dog biscuits and families, household income of $15K and up
you want to do a postcard mailing, you would naturally ABOUT THE PRODUCT
want to narrow your mailing list down to dog owners. Authentic, homemade Southern food cooked by Miss
• How do you get started gathering customer and Harriet herself, who was born and raised in the South.
Menu will consist of only 6 choices, taking the confusion
marketing data? There’s a wealth of knowledge on web out of the decision process.
sites, through case studies, in magazines, newspapers,
DISTRIBUTION
reference books, trade journals and government statistics.
Orders will be filled quickly since the food will be prepared
in the morning and kept hot throughout the day.
QUESTIONS TO ASK YOURSELF
Customers may eat in the restaurant or take food with
• Where are your customers — local, regional, national them. Phone and fax orders will be encouraged, so the
or international? food is ready when the customer arrives. Two employees
• What’s the size or your target market? Is it small (ballet will deliver.
students in Des Moines, Iowa) or large (new parents Location is on a busy, two-way street that is close to a
across America)? major subway stop, making it easy for customers to take
food home.
• When will your product be used — daily, weekly,
monthly? Is there a peak season or will demand be
steady?
• If you’re targeting consumers, what are the demographic
PRICE
similarities? Think about age, income, gender, education,
Our prices will be highly-competitive to similar
type of residence, marital status, profession, lifestyle, take-out / eat-in restaurants in the neighborhood.
hobbies and size of household.
Prices will encourage bulk ordering (5 pieces or more).
• If you’re targeting businesses, what size are you targeting?
Complete meals - a main course and side dish - will be
Know their annual sales, the number of employees and available.
the number of locations. Be sure to identify the decision
ADVERTISING
maker in the business. For example, if you’re sending Small ads placed in local publications will include
a letter to physicians, you should know that generally, discount coupons (costs are outlined in the Appendix).
doctors only get the mail that makes it past the office
PROMOTION
manager’s desk. Menus and fax order forms will be available at the
counter. A menu mailing will be sent three times a year
YOU’VE GAINED A CUSTOMER. NOW WHAT? to area residents (costs are outlined in the Appendix).
Seven local businesses have agreed to place menus and
• How will you get your product to the consumer? coupons in their establishments.
Consider the cost of product storage, packing material,
handling and shipping. PUBLIC RELATIONS
Press releases will be sent to the media, telling the story
• Will you accept credit cards? Determine (1) the cost of of a Southern woman cooking authentic food far away
leasing or buying credit card equipment and (2) the from home. A recipe contest - “Enter Your Best Southern
Fried Chicken Recipe” - will encourage customer loyalty.
percentage paid for credit card sales.
The winning recipe will be featured as a menu item for a
• Who will help customers with information requests, limited time.
new orders, status inquiries and returns?
• Will you allow customers to pay you at a later date?
What are your credit policies (for example, do you
want invoices paid in 30 days)? What is your follow-up
procedure for slow-paying customers?
14
NO SITE IN SIGHT?
Even if you don’t have a web site, you can still take advantage of the
Internet by:
• Setting up an email account so you can send and receive information
• Asking other web sites to include your company information on
their “link lists.”
• Paying for ads on web sites that relate to your product or service
15
BUYING A BUSINESS
QUESTIONS THAT NEED ANSWERS:
• Why is the business for sale? ORANGE DOT MACHINE
• What is the value of the business?
PRODUCT: machining services for the seller’s railroad product line
• What are the company’s products and services?
• Who started the business? What is the history OWNERS: Jack Reich and Tom Wallis, both of whom want to retire
of the business? Where is it located and where LOCATION: Western Connecticut. The building’s landlord is Reich
are its customers located? Holdings, LLC (see Appendix Section 9, “Business Location”)
• Has the competition increased or changed LEGAL STATUS: S Corporation registered in Connecticut
(see page 15)?
HISTORY: Started in 1982 as a division of a larger corporation.
• What sales and marketing plans have you seen?
What are the business’ sales trends? How will CLIENTS: 200 companies in Connecticut and southern New England.
(Commercial companies: 60%; military-related: 25%; railroad: 15%)
you increase sales?
• Will you hire new employees and managers SALES: $1.4 million in sales last year — a 30% increase over the
previous fiscal year, due to an expanded product line and aggressive
or use the existing staff?
marketing. The quality of the equipment and caliber of the staff
present an excellent growth opportunity.
In your APPENDIX, include pictures of the business location, a detailed description and appraised
value of the building, inventory and equipment, assets and liabilities, inspection reports, and any
patents/trademarks. Also include the purchase-and-sale agreement and any legal documents.
17
BUYING A FRANCHISE
BUYER, BE AWARE
A franchise is a legal, business relationship between a
Top Ten Questions To Ask
franchiser (Burger King, for example) and the franchisee Before Buying a Franchise
(you). The franchiser owns the right to the business
name, and sells that right to you. In return, you sell 1 How many franchises are there and how many in
products and services supplied by the franchiser. your area? Don’t be afraid to ask for a list, then to
visit as many as you can. If possible, speak with the
The advantages of buying a franchise can be appealing. owner(s) about some of the real-world realities of
You get an established business presence. And since running the business.
many of the decisions and products come from the
franchiser, your risks are reduced. You are also provided 2 How long has the franchiser been in the industry?
with a range of support services, such as site selection, Ask how long they have been selling franchises.
training, supplies and advertising/marketing plans.
3 How financially healthy is the franchiser?
You have a right to see their financial statements,
THE DISCLOSURE DOCUMENT:
which should be included in the Disclosure
READ IT CAREFULLY
Document. Make sure you are comfortable with
The Federal Trade Commission (FTC) requires sellers
all the numbers.
of franchises and other business-opportunity ventures
to provide a Disclosure Document to prospective buyers. 4 What does your initial cost cover? Discuss things
In it, you should find detailed information that explains like the licensing fee, training, equipment, starting
how business between you and the franchiser will be inventory and promotional fees. Find out if the
conducted. land will be purchased or leased, and whether the
building will be constructed or renovated.
It is crucial that you read this document very carefully,
as many times as you need to, because it contains 5 Will the franchiser help finance the business?
important information — audited financial statements, If so, you still need to develop a business plan with
your start-up and ongoing costs, and locations of other financial projections.
franchises. It will clearly explain the responsibilities of
the buyer and the seller. Have your attorney read 6 What ongoing costs will you pay the franchiser?
through it as well. Discuss royalties, training, insurance and
advertising.
The Disclosure Document must be given to you in
7 Will you be required to buy supplies from the
advance so you can gather and consider any and all
franchiser or their designated suppliers?
information you need to be sure your decision is an
Will prices be competitive?
informed one.
8 Do any restrictions apply when competing with
the competition?
LOAN REQUEST
HOW MUCH WILL YOU NEED? HOW WILL THE LOAN BE REPAID?
You must invest 25% - 50% The lender wants to see the
of your own money. Show loan repaid from the business’
AMOUNT NEEDED
how much and where your income. If necessary, the
• Amount Requested $
money will come from. lender needs to know that the
• Owner’s Investment $
Also provide information • Other Investors $ loan could also be repaid by
about money coming from Total $ selling an asset or by a cash
investors. Show how much infusion from an investor.
money you are requesting USE OF FUNDS
• Inventory $
from the lender. IF YOUR LOAN REQUEST
• Working Capital $
• Equipment, Machinery, Computers $
IS REJECTED, ASK:
HOW WILL THE • Furniture & Fixtures $ • Why it was rejected.
MONEY BE USED? • Other $ • If you can correct the
Uses include inventory, • Real Estate $ problems and re-submit
Total $
furniture, fixtures, equipment, the request.
machines, repairs and Repayment
• If you should go to another
improvements, and working • Period: _________ years lender or seek alternative
capital (money for the • Source: Business Cash Flow financing.
business’ day-to-day • Collateral:
- Accounts Receivable $ WHAT COLLATERAL
activities). Your business’
- Inventory $
income (and other money) ARE YOU OFFERING?
- Equipment & Machinery $
must cover your expenses. - Furniture & Fixtures $
Collateral is assets the bank
You need more money if - Equity in Real Estate $ has a lien on and will take if
your expenses are more than - Other $ you can’t repay the loan.
your income. Use of funds Total $ Collateral can be personal
must be fully documented (savings, stocks and/or equity
with quotes in the APPENDIX in personally owned real estate)
(include a breakdown of machinery, or business (receivables, inventory, equipment).
equipment, fixtures and furniture).
Lenders require appraisals of your collateral and they
HOW LONG ARE YOU ASKING FOR REPAYMENT? discount the value of your assets. The total discounted
• Short Term (less than a year): Short-term loans are collateral amount must equal the total loan amount
called Lines of Credit (LOC) or Revolvers and work like requested.
EXAMPLE: Market Discount Discounted
a credit card, with a pre-determined amount. Lines of Typical Value Percentage Value
credit are primarily used for working capital and must discounts
• Inventory $100,000 50% $50,000
be paid in full within that year. include: • Fixed Assets $50,000 50% $25,000
• Intermediate Term (1-10 years): Like a car loan, saleable • Accounts $80,000 25% $60,000
payments are monthly. Use for buying the business, inventory Receivable
equipment, or for long-term working capital. at 50% or Total $230,000 $135,000
• Long Term (10 years or more): Like a mortgage, used lower, fixed
to buy commercial real estate, commercial vehicles, assets at 50% or lower, collectable
A maximum loan
and heavy equipment. accounts receivable at 25% or lower, request of $135,000 is
and furniture/fixtures/machinery/ based on the collateral
value of their assets.
equipment at fair market value
Loan Decisions
of book value (in the APPENDEX include the, model,
The “1-2-3 Method” on page 30 helps you
year, serial number and fair market value).
calculate your maximum loan amount.
19
FINANCIALS
F O U R F I N A N C I A L S TAT E M E N T S A R E I N C L U D E D I N T H I S S E C T I O N :
1 2 3 4 ACCOUNTING
METHODS
Personal Financial Balance Sheet Income Statement Cash Flow
Statement This is a snapshot Think of this as your Statement Accrual
Your own personal of your business. business’“report card” This will show how
financial health will be
carefully examined by
A moment frozen in
time. See page 22.
over a period of time.
See page 24.
much money comes
in and how much goes
vs.
the lender. See page 20. out. See page 26. Cash
HINTS FOR DEVELOPING FINANCIALS: There are two ways to handle your
• Make realistic assumptions. Lenders know there are risks, so explain how they accounting - accrual or cash.
will be handled. They like to see business owners who recognize and solve them.
Make a record of your assumptions so you can prove to the lender that your 1. The cash method means you
projections are realistic. don’t record a sale until you
• Show reasonable links between the past (if buying a business), actual, and collect money, and you don’t
future projections. record an expense until you
pay for it.
WATCH FOR THESE COMMON FINANCIAL PROBLEMS:
2. The accrual method, the one
• Limited capital
Capital is just another word for money, and if there’s not enough of it, it can lenders want, means:
lead to insufficient working capital (money for day-to-day activities). Don’t try • Sales are made but payments
to make money stretch too far. Ask for more loan money, or cut down on
are not immediately collected.
liabilities and expenses.
Your customers pay later, which
• Little or no record keeping
You must keep meticulous records for yourself, the IRS, and your lender. creates “accounts receivable.”
• Failure to seek outside help • Business purchases are made,
Consult an accountant, gain business advisors, contact the Small Business but paid for later, creating
Administration/SBA (www.sba.gov) or your state’s Department of Economic “accounts payable.”
Development (look in the phone book or search on the Internet). Your advisors‘
• Assets (like equipment) are
input is valuable but don’t be totally dependent on them. Educate yourself.
You should have a basic understanding of your company’s finances. depreciated over their lifetime.
Know how to read your own financial statements and reports. This is tax deductible.
• Poor management • Net Income does not always
A business needs a good financial manager (within the company or an outside mean cash since money is
advisor). It’s your money, so be very self-disciplined. tied up in accounts receivable
• Reluctance to invest in the business
and inventory.
Why should the lender stand behind you if you won’t invest any of your own money?
You must put a percentage of your own money into the company (usually 25% to 50%).
• Failure to personally guarantee the loan repayment
If the business fails for any reason, the owners must repay the loan. Lenders need
to be assured of your total commitment.
20
2 BALANCE SHEET
Y O U R B A L A N C E S H E E T INCLUDES T H E F O L L O W I N G :
WHAT’S THE
BIG IDEA? ASSETS Fixed Assets (net) Accounts Payable (A/P)
What the company owns Fixed Assets minus Accumulated Purchases not paid for
The Balance Sheet is Depreciation
Current Assets Total Current Liabilities
like a snapshot of your Can be converted into cash in one year Advances to Owners Total all the Short-Term Liabilities
business, frozen for a Money that owners take out of the busi-
Accounts Receivable Long-Term Liabilities
ness in the form of a loan to be repaid
second. The numbers Sales made but not collected Due for more than one year
Total Non-Current Assets
change every day. Inventory Loan Payable
Add up all the Non-Current Assets
Inventory on hand, waiting to be sold Due after one year’s worth of payments
Total Assets
Total Current Assets Total Long-Term Liabilities
Add Current Assets and Non-Current Assets
Add up all of the Current Assets Total all the Long-Term Liabilities
s
LIABILITIES
Liabilitie Non-Current Assets Total Liabilities
How much the company owes
Add the Long-Term and Current
L
Assets Takes one year or more to turn
into cash Current Liabilities Liabilities
Liabilities due within one year
Think of the balance sheet as Fixed Assets CAPITAL OR NET WORTH
a seesaw. The assets and This includes property, plant, Current Portion of The business’ equity
liabilities alone are out of and equipment Long-Term Debt
balance. Capital, the last weight Owners Investment
you put on the scale, makes One year’s worth of loan payments
Less Depreciation Amount of money owners have invested
a perfect balance. Note Payable
Subtract Accumulated Depreciation
Retained Earnings
Assets Liabilities+Capital Due within one year
Income earned and kept in the business
L Total Capital
Max Computer Company Add Owners Investment and
Balance Sheet Retained Earnings
December 31, 2008
Total Liabilities & Capital
Depreciation: ASSETS Add Liabilities and Capital.
Except for land, assets Current Assets: Equal to Total Assets
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000
wear out. The value Accounts Receivable . . . . . . . . . . . . . . . . . . . . 75,000
goes down and can be Inventory (ending) . . . . . . . . . . . . . . . . . . . . 85,000
deducted. Values for Total Current Assets . . . . . . . . . . . . . . . . . . . . . . . . . . 170,000 Date:
assets are presented Non-Current Assets Include last three years’
via a reserve for depre- Fixed Assets . . . . . . . . . . . . . . . . . . . . . . . . . 140,000 fiscal year-end statements
Less Accumulated Depreciation . . . . . . . . . . (25,000) and an interim statement
ciation. Market value, Fixed Assets (net) . . . . . . . . . . . . . . . . . . . . 115,000
or the price you could Advances to Owners . . . . . . . . . . . . . . . . . . . 6,000
(not more than three months
sell it for, will differ Total Non-Current Assets . . . . . . . . . . . . . . . . . . . . . . 121,000 old) in the APPENDIX.
from this figure. Total Assets (170 + 121) . . . . . . . . . . . . . . . . . . . . . . . . 291,000 Start-up companies: Include
an opening Balance Sheet
LIABILITIES (what the balance sheet will
Current Liabilities look like the day after the
Current Portion of Long-Term Debt . . . . . . . . . 6,000
Note Payable . . . . . . . . . . . . . . . . . . . . . . . . . 100,000
loan closes).
Accrued Taxes . . . . . . . . . . . . . . . . . . . . . . . . 3,000
Accounts Payable(A/P) . . . . . . . . . . . . . . . . . . 41,000
Total Current Liabilities . . . . . . . . . . . . . . . . . . . . . . . . 150,000
Long-Term Liabilities
Loan Payable . . . . . . . . . . . . . . . . . . . . . . . . . 54,000
Owners Investment: Total Long-Term Liabilities . . . . . . . . . . . . . . . . . . . . . . 54,000 These
numbers should
Also called capital Total Liabilities (150 + 54) . . . . . . . . . . . . . . . . . . . . . . . 204,000
be the same.
or common stock in
CAPITAL OR NET WORTH
a corporation
Owners Investment . . . . . . . . . . . . . . . . . . . 20,000
Retained Earnings . . . . . . . . . . . . . . . . . . . . 67,000
Total Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87,000
Total Capital:
Also called net worth Total Liabilities & Capital (204 + 87) . . . . . . . . . . . . . . . 291,000
23
BALANCE SHEET
ASSETS
Current Assets
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . $
Inventory (ending) . . . . . . . . . . . . . . . . . . . . . . . . $
Other Current Assets . . . . . . . . . . . . . . . . . . . . . . . $
Total Current Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Non-Current Assets
Fixed Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Less Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . $
Fixed Assets (net) . . . . . . . . . . . . . . . . . . . . . . . . . $
Advances to Owners . . . . . . . . . . . . . . . . . . . . . . . . $
Other Non-Current Assets . . . . . . . . . . . . . . . . . . . $
Total Non-Current Assets . . . . . . . . . . . . . . . . . . . . $
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
LIABILITIES
Current Liabilities
Current Portion of Long-Term Debt . . . . . . . . . . . . . $
Note Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Accrued Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Accounts Payable(A/P) . . . . . . . . . . . . . . . . . . . . . . $
Total Current Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
These
Long-Term Liabilities numbers should
be the same.
Loan & Notes Payable . . . . . . . . . . . . . . . . . . . . . . $
Total Long-Term Liabilities . . . . . . . . . . . . . . . . . . . $
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
CAPITAL
Owners Investment . . . . . . . . . . . . . . . . . . . . . . . . $
Retained Earnings . . . . . . . . . . . . . . . . . . . . . . . . $
Total Capital $
TOTAL LIABILITIES & CAPITAL $
24
3 INCOME STATEMENT
YOUR INCOME STATEMENT INCLUDES THE FOLLOWING:
WHAT’S THE
BIG IDEA? SALES Less: Ending Inventory Operating Income
Net Sales This number becomes the beginning (or Loss)
The Income Statement Revenue or income. Gross sales inventory for the next year’s Income Shows how the business performed.
is before returns and allowances. Net Statement.
is your company’s report Interest Expense
sales is after returns and allowances.
card. Expenses are Total Cost of Goods Sold Subtract interest expense.
Less Cost of Goods Sold Compute the Cost of Goods Sold.
subtracted from income, Net Profit before taxes
Cost to make products including
Gross Profit Less: Income Taxes
which gives you the materials and labor.
Sales less cost of goods sold. Tax rates depend on your
business’ financial Beginning Inventory This is your profit margin. business’ legal status.
Comes from the Ending Inventory
performance or net profit
of the previous year.
(or loss) over a period of EXPENSES PROFIT
Purchases Selling Expenses Profit left after all expenses
time. Other names for Used to make product. Salaries and expenses related (including taxes) have been paid.
the Income Statement to sales only.
Labor
are Operating Statement, Used to make product only. Other General and Administrative
labor-related expenses are included All other expenses used to run
Earnings Statement, or in the Operating Expenses section. the company.
Profit and Loss Statement.
Date:
Max Computer Company Represents activity for an
INCOME STATEMENT entire period, at the end
December 31, 2008 of that time period.
Net vs. Gross Sales
Gross sales is the amount SALES
before adjustments (like
Net Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .900,000 $75,000 was the ending
returns and allowances).
Less Cost of Goods Sold: inventory for the previous year
The adjusted figure is
Beginning Inventory . . . . . . . . . . . . . 75,000 and became the beginning
Net Sales.
Purchases . . . . . . . . . . . . . . . . . . . . 350,000 inventory for 2008.
Labor . . . . . . . . . . . . . . . . . . . . . . . .200,000
Total . . . . . . . . . . . . . . . . . . . . . . . .625,000
Operating Income:
Less: Ending Inventory . . . . . . . . . . - 85,000
Gross Profit less Selling This number is pulled
Cost of Goods Sold (625 less 85) . . . . . . . . . . . . . . 540,000
Expenses and General/ from the Balance Sheet
GROSS PROFIT (900 less 540) . . . . . . . . . . . . . . . 360,000
Administrative Expenses. on page 22.
EXPENSES
Operating Expenses:
In the APPENDIX, Selling Expenses . . . . . . . . . . . . . . 90,000
include three years’ fiscal General & Administrative . . . . . 170,000
Total Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 260,000
year end statements plus
Operating Income (360 less 260) . . . . . . . . . . . . . 100,000
an interim statement Interest Expense . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000
(not more than three
Important Note: Compare
months old). PROFIT
numbers in the current year’s
Net Profit before taxes (100 less 20) . . . . . . . . . . . . 80,000
Income Statement with the
Start-up companies: Less: All Income Taxes . . . . . . . . . . . . . . . . . . . . . . 27,000
previous year. For control
Project month by Net Profit (80 less 27) . . . . . . . . . . . . . . . . . . . . . . 5 3,000
purposes, you need to know
month for the first year, if income/profits and expenses
quarterly for the second are going up or down.
Net Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$
Beginning Inventory . . . . . . . . . . . . . . . . . . . . . . . . .$
Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$
Labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$
EXPENSES
Operating Expenses:
Selling Expenses . . . . . . . . . . . . . . . . . . . . . . . . . .$
Total Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$
Operating Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$
Interest Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$
PROFIT
Net Profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$
26
important figure, the breakeven point, 3. Payroll Expenses (Taxes, vacations, etc.)
when cash income equals the cash 4. Outside Services (Outside labor)
outflow (see page 30). 5. Supplies (Office & operating, not for re-sale)
6. Repairs and maintenance
Tips for preparing
7. Advertising
Cash Flow Statements:
8. Car, Delivery and Travel
Numbers in the Cash Flow Statement 9. Professional Services (Accounting, legal, etc.)
will also appear in the Income 10. Rent (real estate only)
Statement. However, the Cash 11. Telephone
Flow Statement differs because it 12. Utilities (Water, heat, electricity, etc.)
records when cash is received, 13. Insurance (on business property & products)
when cash is paid, and how much 14. Taxes (Real estate, sales, inventory, etc.)
cash you have reserved. 15. Interest (on loans)
• Begin with income at the top, 16. Other Expenses (Specify each)
followed by expenses and repayment
17. Miscellaneous (small expenses)
of the loan.
18. Subtotal
• Show realistic assumptions. If sales
F. OTHER OPERATING COSTS:
increase 80% every year, this may
seem unrealistic. Prove assumptions 1. Loan Principal Payment (include equipment)
and include them in the APPENDIX. 2. Capital Purchases (Specify)
• Show monthly figures in the first year, 2. Bad Debt (End of month)
quarterly figures in the second year, 3. Inventory on Hand (End of month)
and a lump sum or one figure in the 4. Accounts Payable (End of month)
third year.
5. Monthly Depreciation
27
CASH FLOW STATEMENT
ESSENTIAL
OPERATING
DATA
The five items shown at
the bottom of the Cash Flow
Statement can be kept
separately and included at
the bottom of your monthly
cash flow projections. They
are important planning
and cash flow projection
tools.
1. Accounts receivable
Previous unpaid credit
sales, plus current month’s
unpaid credit sales.
2. Bad Debt
Should be deducted from
the month. This figure is
based on past history or
industry standards.
3. Inventory on Hand
Any products available
for sale at the end of
the month.
4. Accounts payable
Any accounts due at the
end of the month.
5. Depreciation
Assets wear out and lose
value. The monthly depre-
ciation value is established
by your accountant
(as allowed by the IRS).
28
R AT I O S
WHAT’S THE BIG IDEA?
Ratios are your business’ scores. Even
2 L I Q U I D I T Y R AT I O S
though ratios are not included in your
business plan, they will be calculated by
Working Capital
lenders to make decisions. Number Source: Balance Sheet (pg. 22)
Current F O R M U L A
Lenders and investors compare your ratios to: Assets
• acceptable bank ranges (pg. 22) Working
• a company’s prior years
• your business’ history
• other companies in your industry
Subtract
Current
Liabilities
$170,000
- $150,000 = $20,000
Capital
(pg. 22)
Industry averages are found in reference books and on N O T E : Shows if a company has enough cash to pay bills.
the Internet. They include the RMA Annual Statement
This example shows an excess amount after paying all current
Studies, the Almanac of Business and Industrial Financial
Ratios, Dun & Bradstreet, your industry’s associations,
liabilities. The answer must be positive. More money is needed
trade periodicals (magazines and newspapers for your to meet expenses if the answer is negative.
industry), and the Small Business Administration/SBA
(www.sba.gov).
Quick or Acid Test
Number Source: Balance Sheet (pg. 22)
1 A S S E T M A N A G E M E N T R AT I O S Total Current Assets
of $170,000
The answer
should be 1
(pg. 22) less F O R M U L A or more. In
Accounts Receivable Turnover Inventory of this example,
=
$85,000 $85,000 the answer,
Number Source: Balance Sheet (pg. 22) (pg. 22) .56 $0.56, is less
$150,000 than 1. The
& Income Statement (pg. 24) company
Total could not pay
Current Liabilities (pg. 22) all its current
Accounts
F O R M U L A liabilities
Receivable N O T E : Inventory may become no longer useful.
It takes without
($75,000
=
$27,375,000 30 days This ratio eliminates inventory from current assets selling some
on pg. 22)
30.4 to collect inventory.
X 365 days and cash. It’s called “quick” because it includes
$900,000 bills
items that can be turned into cash.
Net Sales Figure (pg. 24)
R AT I O S
3 D E B T M A N A G E M E N T R AT I O S 4 P R O F I TA B I L I T Y R AT I O S
VIR
o
Number Source: Balance Sheet (pg. 22) Imp Number Source: Income Statement (pg. 24)
o
Rati
F O R M U L A
F O R M U L A Net Profit The profit
Total (pg. 24)
The
Liabilities
(pg. 22) $204,000
$87,000 = 2.34
company
is leveraged
2.34 times Net Sales
(pg. 24)
$53,000
$900,000 = .0588
margin is
5.9%
Total Capital
(pg. 22)
N O T E : Shows the percentage of net profit for every dollar of
N O T E : Determines if a company has enough equity. sales. If the profit margin is too low: the prices are too low, the
Lower answers are better. Lenders prefer this ratio to be cost of goods is too high, or expenses are too high. Compare
3 or lower. the profit margin to previous years (if the business is over three
years old). New businesses may compare the profit margin to
Accounts Payable Turnover
those published in RMA studies or by trade associations.
Number Source: Balance Sheet (pg. 22)
& Income Statement (pg. 24)
Cash Flow to Current Maturities
Very rtant
VIR
Accounts
F O R M U L A
(Debt Service) Imp
o
Payable at o
Accounts NumberSource:Balance Sheet (pg. 22) Rati
$41,000
Payable
(pg. 22)
X 365 days
Purchases
$14,965,000
$350,000 = 42.75 are paid
every
43 days
& Income Statement (pg. 24)
Net Profit of F O R M U L A
For every
$53,000
(pg. 24) dollar of
FINANCIAL FORMULAS
When a company has neither a profit nor a loss, it is the breakeven point. It is
BREAKEVEN POINT important to determine your breakeven point so you know the sales needed for
your business to be profitable. The numbers for this formula come from your Income Statement (see page 24).
2
Total your Variable Expenses and divide them by the $540,000 COST OF GOODS SOLD 60% (540K/900K)
Net Sales to calculate the percentages they represent +$90,000 SELLING EXPENSES + 10% (90K/900K)
$630,000 TOTAL VARIABLE EXPENSE 70% (630K/900K)
100%
3
Subtract your Total Variable Expenses from your $900,000 NET SALES
Net Sales to calculate the Margin. -$630,000 TOTAL VARIABLE EXPENSE - 70%
$270,000 MARGIN 30% or .30
4
Divide your Fixed Expenses by the Margin $170,000 FIXED EXPENSES (this number comes from page 24 General & Administrative)
and the answer is your Breakeven Point ÷ .30 MARGIN
$566,667 BREAKEVEN AMOUNT
This company needs sales of $566,667 to break
even. One dollar more and the business is profitable.
One dollar less and the business shows a loss.
3 EQUITY A business can borrow Assume ABC Company wants to refinance a $75K Maximum loan based
Also called $3 for every $1 invested. loan. The business has assets of $100K, liabilities of on equity is $75K ($25K is $36.5K.
DEBT-TO-WORTH $75K, and Net Worth or Equity of $25K. in equity x 3)
or LEVERAGE
$75K
31
To Do Done
• Detailed industry information including economic trends, Page 18 > LOAN REQUEST
growth patterns and forecasts. • The use of loan proceeds: Include quotes and a breakdown of
To Do Done
furniture, fixtures, equipment and machinery.
Page 10 > MANAGERS & EMPLOYEES • Collateral: Make, model, year, serial number, and fair market
• Managers’ job descriptions, salaries and benefits. value of furniture, fixtures, equipment and machinery.
• Monthly cost and explanation of outsourced services or functions. • Cash Flow analysis to prove working capital needs.
• Managers and employees resumes To Do Done
To Do Done
Page 20 > PERSONAL FINANCIAL STATEMENT
Page 11 > OPERATIONS & LOCATION • Stocks & Bonds: The number of shares, name of securities, cost,
• Include proposed rentals, leases or purchases of furniture, market value with the date.
fixtures, equipment and machinery. • Life Insurance policies: Provide the face amount and cash surrender
• Suppliers names, addresses, products or services supplied, value, name of insurance companies and beneficiaries.
costs/quotes, delivery/shipping fees, turnaround, terms of sales, • Real Estate: List each property and include the date purchased, its
contracts, and a purchasing plan. original cost, and the present market value. Also include the mort-
• Details about assistance from your suppliers. gage account number, loan balance, and the monthly payment.
• Provide a copy of the deed if you own the business location. • Other property: Any pledged as security/collateral. Include the
If buying the location, include a purchase-and-sale agreement name and address of lien holder, lien amount, and payment terms.
and related legal documents. An appraisal of the building, the • Notes Payable: Include the name and address of the noteholder,
assets and liabilities along with an environmental inspection, will original loan balance, current loan balance, payment amount,
be done by the lender. and what collateral is used for security.
• If your location is leased, include a copy of the lease • Unpaid taxes: Describe the type of unpaid tax, who taxes are
(or proposed lease) with terms, conditions, and cost. owed to, the amount, when it is due, and whether there is a lien
• Show quotes for improvements and renovations. on any property.
• Traffic patterns if you own a retail business. To Do Done
• Zoning statement from local government. Page 21 > PERSONAL FINANCIAL STATEMENT
• Approval letters from local and state inspectors (building, fire, • Copies of life insurance statements, stocks and bonds certificates,
health, environmental, and occupational safety). and real estate deeds.
• Photos of your location, inside and outside. Include a floor plan, • Copies of notes payable, real estate statements with monthly
blueprint or plot plan (if constructing location). payment amounts, and unpaid tax bills.
To Do Done
• Copies of signed tax returns (past three years) for each owner.
Page 12 > MARKETING To Do Done
• Detailed plans and costs for research and development. Page 22 > BALANCE SHEET
• Advertising and promotional ideas, schedules and budgets. • Existing businesses: Last three years’ fiscal year-end statements
• Compensation (salary, commission, or both) details for sales and an interim statement (not more than two months old).
staff, reps, agents, brokers or wholesalers. • Start-up companies: Include an opening Balance Sheet (balance
To Do Done
sheet the day after the loan closes).
Page 15 > MARKETING • Balance Sheet before new financing and after the financing.
• Product and price comparisons of competitors. To Do Done
To Do Done
Page 24 > INCOME & EXPENSE STATEMENT (or P&L)
Page 16 > BUYING A BUSINESS • Start-up companies: Provide projections month by month for the first
• Pictures of the business location year, quarterly for the second year and one whole year for the third year.
• Detailed description • Existing businesses: Three years’ fiscal year end statements plus an
• Appraised value of the building, inventory and equipment. interim statement (not more than two months old).
• Inspection reports (if available). If not, let the lender order them. • Provide a three-year projected Cash Flow analysis (monthly for
• Copies of tax returns (past 3 years) from the seller and interim the first year, quarterly for the second year, and a lump sum for
(year-to-date) Income Statement and a current Balance Sheet. the third year) to prove the need for working capital.
For more information:
Call 1-888-877-2265
CliCk www.capitalonebank.com
ViSiT your nearest Capital One Bank
branch to speak with an associate
Products and services are offered by Capital One, N.A., Member FDIC. “Capital One Bank” is a trade name of Capital One, N.A. and does not refer to a separately
(100-3232) R-05/08 insured institution. ©2008 Capital One. Capital One is a federally-registered service mark. All rights reserved.