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Writing up an effective business plan to attract investors or lenders includes at least three essential items. Part I described the ins and outs of an income statement. This article defines the necessary elements of the balance sheet and Part III outlines the importance of the Cash Flow statement. Putting together a well-polished set of financial statements may be the key to securing the business financing you need.

A balance sheet is a measure of how much your business is worth. It can be created with a simple Excel spreadsheet or any similar software product or you can invest in business software to create more complex documents. It lists all your company’s assets (things you own) and subtracts all liabilities (debts you owe) to arrive at your net worth. This is also a way to determine your equity share in the company. Investors need to see how much of the company you own in order to know how much equity they bargain for.

Balance sheets are helpful for showing venture capitalists or bankers a full picture of your company’s current financial course. It can be useful to include balance sheets from previous years to illustrate how your company is doing better from year to year, with lower debt ratios or higher equity shares, for example.

In addition to providing investors and lenders with past balance sheets, you can also create projected balance sheets to show them your goals and plans to meet certain benchmarks. A look at the future can give investors an idea of how their money will be put to use and if it will be used well.

Once you have a solid income statement and balance sheet, you are ready to move on to mastering the Cash Flow statement. With the inclusion of all three, you will be prepared to face the tough questions on every investor’s mind.


Search for Small Business Loan Sources and receive your matched lender list
AND received FOUR free Business eBooks worth $39.95!
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