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The drive to be your own boss might have caused you to quit being an employee and start your business, but the quest for income is what keeps it going.
New and existing businesses that need financing will have to demonstrate the profit potential of the enterprise in order to convince a lender to provide needed funding.
Unless you're thinking of starting a religious or charitable organization, the primary reason you're starting a business is because you think you can make money.
Because cash is usually in short supply for small businesses, tying up this precious resource in excessive inventory or accounts receivable can be damaging.
If you have a new small business or a modest company needing financing or investment, the projected cash flow Statement may be the most important financial assumption you make.
Alongside your financial forecasts it is good practice to show that you have reviewed the risks your business could be faced with, and that you have looked at contingencies and insurance to cover these.
When you develop a business plan, financial projections and cash flow analysis are among the most critical elements.
However, assuming they are experts in your industry is a mistake.
Write as detailed a narrative as possible for your financial assumptions, with references that your loan officer can verify.
Three universal financial presentations are expected in all business plans.
You must include a projected income statement, balance sheet and cash flow statement for the coming three to five years.