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Business Finance

 

Financial Viability of the Start-up

The financing section of a business plan is a crucial area where potential investors will seek to ascertain the overall financial prowess and skill of the management.

The information contained within the finance chapter of a plan might also result in conclusions being drawn on the absolute viability of the proposal and therefore perhaps the future of the venture.

Depending on the complexity of the financing and the amount of funds required for the start-up, the section might consist of one page, or at the other end of the spectrum, several hundred pages.

Financial Requirements

Both the financial requirements and their apportionments should be detailed and explained here. Any potential investor will be interested in where their money will be supposedly spent and how their contribution compares to other sources being sought by the new business.

This information might provide them with an estimate of the security attached to their investment and the likelihood of them achieving a gain over and above that which was originally contributed.

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Importance of Finance

Due to the importance of this information in a business plan, it is possible for the financial section to be further broken down in to smaller sections which may deal with detailed areas of funding, income and expenditure.

Such sections might be: initial and short term funding requirements, and medium to long term financing. Each of these elements might be contained within a cash flow forecast which will detail how much and when each type is required.

 
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1. Which exercise would be undertaken to estimate future financing requirements?
 
Preparing a profit and loss account
Compiling a balance sheet
Preparing a cash flow forecast
Calculating gross profit
  
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