Financial Management Plan
Budget/ Pro Forma
The financial management plan is a prepared budget using the prior two years actual financial information and three years projections. All the information contained in the business plan should tie to the financial projections or pro formas.
Note that most new companies do not make a profit in the first year of operations. The business financial information should take this into account and give an indication of how management will make the business profitable. If it is an ongoing business, then, of course, the lender will want to know how management intends to maintain profitability and to make the business grow.
Business federal income tax returns for the prior three-year period should be received with the loan application. These tax returns should be complete with all supporting schedules, statements and K-1’s.
Personal federal income tax returns for prior three years to include all supporting schedules, statements, and K-1’s on all owners, partners, and 20 percent or greater owners of corporate stock.
The Business Plan
The business plan describes all aspects of the business to be undertaken or in existence, and is a tool for the business owner to better understand the business and to plan for success. It should also present a history of the business to date.
In addition, the business plan should indicate a plan or succession in the management of the company. If there is no plan for succession, the lender may want to consider requiring key-man life insurance that will pay off the loan, should anything happen to the irreplaceable manager.
The business plan format can be as simple as the one included in the Sample Pro Forma (projections) format, or it can be complicated. A sample of a good business plan can be found on the SBA Web site for small business owners or on the SCORE Web site, www.score.org. (SCORE is a resource partner with the SBA. It provides information for small businesses).
- The business. The borrower should describe in detail the type of business, company name, nature of the business, type of entity, whether it is a corporation, partnership, or sole proprietorship, number of employees, date established and so on.
- Products and Services. The business plan should describe the products and services of the business and why they are useful. It should describe the market place and the business’s position in it. The plan should include a list of key customers and major suppliers.
- Location. The location of the business and the geographical sales area is important information to include, as well as the key factors making its products desirable in this particular market segment.
- Marketing Plan. This includes what management is doing now and what it will do in the future to market products or services. The business plan should include future plans for growth and expansion.
- Competition. The business plan should include a list of major competitors along with a list of other companies in the same geographical area that are selling similar products or services.
- Pricing and Sales. The business plan should describe pricing and sales strategies, which should tie to the budget and pro forma
- Advertising and Public Relations. If the company advertises, copies of ads or articles should be included with the business plan. Copies of any press releases should also be made part of the business plan.
- Management. Management resumes’ should be presented for each member of the company holding a management position. The resume’ should include all personal contact information as well as education and work experience.
Sample Pro Forma (projections) Format
|Financial Statement as of Date:|
|Year End ____||Year End ____||Projected Year||Projected Year||Projected Year|
|Less Discounts & Returns|
|Cost of Goods Sold|
|Bank Service Charges|
|Amort of Intangibles|
|Legal / Professional|
Pensions / Payroll Taxes
|Repairs / Maintenance|
|Supplies / Operating|
|Taxes / Licenses|
|Travel / Entertainment|
|Utilities / Telephone|
|Salaries / Officers|
|SG & A Expenses|
|Total Operating Costs|
|Total Other Expenses|
|Profit Before Taxes|
|Dividends / Distributions|