APPENDIX B: HOW TO WRITE A BUSINESS PLAN (Pt 2)

VI. Financial documents

These are the records used to show past, current and projected finances. The following are the major documents you will want to include in your business plan. The work is easier if these are done in the order presented.

• Summary of financial needs -- This is an outline indicating why you are applying for a loan and how much you need.
• Sources and uses of funds statement -- It will be necessary for you to tell how you intend to disperse the loan funds. Back up your statement with supporting data.
• Cash flow statement (budget) -- This document projects what your business plan means in terms of dollars. It shows cash inflow and outflow over a period of time and is used for internal planning.
• Cash flow statements show both how much and when cash must flow in and out of your business.
• Three-year income projection -- A pro forma income statement showing your projections for your company for the next three years. Use the pro forma cash flow statement for the first year's figures and project the next according to economic and industry trends.
• Break-even analysis -- The break-even point is when a company's expenses exactly match the sales or service volume. It can be expressed in total dollars or revenue exactly offset by total expenses or total units of production (cost of which exactly equals the income derived by their sales). This analysis can be done either mathematically or graphically.

Note: The following are actual performance statements reflecting the activity of your business in the past. If you are a new business owner your financial section will end here and you will add a personal financial history. If you are an established business you will include the actual performance statements that follow.

• Balance sheet -- Shows the condition of the business as of a fixed date. It is a picture of your firm's financial condition at a particular moment and will show you whether your financial position is strong or weak. It is usually done at the close of an accounting period and contains assets liabilities and net worth.
• Income (profit and loss) statement -- Shows your business financial activity over a period of time (monthly annually). It is a moving picture showing what has happened in your business and is an excellent tool for assessing your business. Your ledger is closed and balanced and the revenue and expense totals transferred to this statement.
• Business financial history -- This is a summary of financial information about your company from its start to the present. The business financial history and loan application are usually the same. If you have completed the rest of the financial section you should be able to transfer all the needed information to this document.

VII. Supporting documents

These are the records that back up the statements and decisions made in the three main parts of your business plan. Those most commonly included are as follows:

• Personal resumes -- Should be limited to one page and include work history educational background professional affiliations and honors and special skills.
• Personal financial statement -- A statement of personal assets and liabilities. For a new business owner this will be part of your financial section.
• Credit reports -- Business and personal from suppliers or wholesalers credit bureaus and banks.
• Copies of leases -- All agreements currently in force between your company and a leasing agency.
• Letters of reference -- Letters recommending you as being a reputable and reliable business person worthy of being considered a good risk. (Include both business and personal references.)
• Contracts -- Include all business contracts both completed and currently in force.
• Legal documents -- All legal papers pertaining to your legal structure proprietary rights insurance titles etc.
• Miscellaneous documents -- All other documents that have been referred to but are not included in the main body of the plan (e.g. location plans demographics advertising plan etc.).

Putting Your Plan Together

When you are finished: Your business plan should look professional, but the lender needs to know that it was done by you. A business plan will be the best indicator he or she has to judge your potential for success. It should be no more than 30 to 40 pages long. Include only the supporting documents that will be of immediate interest to your potential lender. Keep the others in your own copy where they will be available on short notice. Have copies of your plan bound at your local print shop, or with a blue, black or brown cover purchased from the stationery store. Make copies for yourself and each lender you wish to approach. Do not give out too many copies at once, and keep track of each copy. If your loan is refused, be sure to retrieve your business plan. For a more detailed explanation of each section of the business plan outline, see SBA's publication, How to Write a Business Plan, which includes step-by-step directions and sample sections of actual business plans. Also available from the SBA is a VHS videotape and workbook, The Business Plan: Your Roadmap for Success.