There is a wide variety of funding available for a startup business, but one of the fundamental decisions which must be made by the entrepreneur is whether or not to seek outside equity and long term debt finance to fund growth or to rely on bootstrapping finance methods such as founders equity, short term debt, and revenue to grow the business.
A business plan financial projection will identify the funding requirements needed by a business both in terms of maximum or peak amount required and the length of time the funding is needed for.
The length of time the funding is required for is an important consideration when considering small business financing options. The general principle is to try and match the funding term to the assets being funded.
To give stability in predicting future cash flow requirements, typically a business will borrow from a bank using a fixed payment loan where interest is compounded monthly and repayments are fixed and paid monthly throughout the term of the loan.
This business loan repayment calculator can be used for any loan up to a maximum term of 120 months (10 years), and will calculate the monthly repayments due on the loan together with the total amount repayable and total interest payable over the term.
In addition this commercial loan calculator will provide a monthly loan amortization schedule.
Investors are often the most critical readers of a business plan financial projections since they have limited knowledge of the background to your business and generally invest in riskier situations.
Investor business plan financial projections need to reflect the type of audience they are aimed at and the type of finance being sort. Investors have different requirements from lenders, and will look for different information in the figures.
A financial projection will answer the question of how much funding a business will need to launch and operate successfully. The next question is how, and from
where, the business can obtain the finance needed.
In the vast majority of cases when considering how to finance a small business, the owners and management team can only provide a small fraction of the funds required and outside help is usually required.