Business Financing, Opening day Balance Sheet, Break Even and the Business Plan

//Business Financing, Opening day Balance Sheet, Break Even and the Business Plan

Business Financing, Opening day Balance Sheet, Break Even and the Business Plan

Business plan for any entrepreneurs thinking of applying for small business financing.
This article continues discussing further the need for properly prepared business plan for any entrepreneurs thinking of applying for small business financing in Ontario. Most entrepreneurs looking for development and cash flow needs have to be properly prepared for financing in order to receive it. One of the most important portions of the business plan is opening a balance sheet and break even analysis. Entrepreneurs working on strategic plan, have to work on the Opening Balance Sheet and break even analysis, within their current business reality. They also have to work within the cash flow projections for the next 12 and 24 months period. A properly prepared Opening day Balance sheet or starting balance sheet will drive the amount and quality of financing.

When entrepreneurs come to our office for the first time, they see that our associates are taking in depth view of their business and financing requirements. Sometimes wasteful spending drives higher cash flow requirements and development costs. Our associates have extensive experience with placing business financing solutions, small business loans and operating lines in a variety of segments of economy. These expertise will affect the cash requirement, term and type of financing might be acquired could be different from what entrepreneurs might think. Working capital needs also might be reviewed and redrafted as budget changes. Obviously entrepreneurs know their business better than our associates, and we are not pretending or hoping to know it better. But we know very well how to properly prepare strategic plan and how to properly present this plan with opening day balance sheet and break even analysis to the lenders.

The opening day balance sheet (starting day balance sheet) is one of the technical requirements for entrepreneurs applying for small business loans. The balance has to have enough cash to carry the business till the breakeven point if the business is a start-up. Therefore break even analysis is also a super important document in this process. If the entrepreneur already has a existing established business, the starting day balance sheet needs to have enough cash for both day to day operations and also the expansion and development cash needs need to be incorporated. Debt service for new financing needs to be incorporated into cash flow projections and balance sheet proformas for the next 12-24 months.

Entrepreneurs preparing strategic plan and drafts for the opening day balance sheet and break even analysis need to remember to include new and old equipment in the balance and properly subtract a new amortization amount in the 12-24 months projections. Since amortization is tax deductible, the net bottom line of the business is generally higher once properly recalculated using general accounting principles and new equipment balance costs. This process might be very complex for small and large businesses so we strongly advise using professionals from our team to do this for any type of applications.

The break even analysis, typically includes graphical analysis, showing how much time entrepreneur needs to survive in order to make enough income from his business to pay for all expenses and debt service. Approximate monthly revenue should be modeled using historic data, expected business growth using a strategic development plan and new marketing initiatives. Marketing initiatives need to be properly explained and described in the business plan together with expected revenue growth associated with these expenses. All growth numbers and expected surplus needs to be managed with a discount and be based on some average market figures. All of the above might be very complex and the market data might be very difficult to obtain. All entrepreneurs need to be cautious on what information sources they can use.

The opening day balance sheet also needs to properly list all liabilities. This includes the new business financing that entrepreneurs are trying to achieve. A properly prepared starting day balance sheet and break even analysis are super important for strategic plan for entrepreneur to be successful in this business financing. Therefore using proper consultant is also super important and we hope you will call us to start discussions.

Happy Financing Everybody!

By | 2018-02-15T16:05:44+00:00 February 15th, 2018|Blog|0 Comments