Entrepreneurs who want to apply for financing for new
business plans benefit from drawing up a strategically and financially
substantiated business plan. To apply for financing, it is also necessary to
submit a number of financial budgets to the bank. Together, these budgets form
the financial plan and make an important contribution to the success of the
financing application (the business plan). Making a budget for your business plan
also brings many other benefits. In this article, we list the 5 most important
benefits for you.
Why should you make a financial budget for your business plan?
What are the main reasons for drawing up financial budgets
for your business plans? A budget not only increases the success rate of your
financing application, but a watertight financial plan also contributes
strongly to your company's success. Below we take a closer look at the benefits
of making a budget and the usefulness and necessity of a business plan, which
is well substantiated by financial budgets.
Clarity about the financial feasibility of your business plan
Budgets are simply numerical overviews of your future
business plans. The budget you have drawn up can then be used to determine whether
your business idea is also financially viable. The business plan goes one step
further; various budgets are worked out in the financial plan, such as the
investment, financing, operating, and liquidity budgets. This allows you to map
out the possible risks and all financial consequences as extensively as
possible. So you have more control over your business finances. In addition,
the business plan also gives direction to your business activities for the
coming years.
Greater chance of success of your financing application
A numerically substantiated business plan provides insight
into the required startup capital and any external financing. Both the bank and
other investors assess your financing application based on the financial plan
you offer and your strategic marketing plan.
To be eligible for financing or credit, you must meet the
increasingly stringent requirements set by banks and other financiers for the
financial substantiation of the business plan. With a well-substantiated and
realistic financial plan, you give the bank more certainty about the payback
time of the loan and the way in which you minimize all risks. This
significantly increases the success rate of your financing application and
business plan.
Timely adjustment of your financial planning
When drawing up a budget, you record the set business goals
in figures. After the start of your new venture, you can use this financial
planning as a tool to check whether your company is still on track. For
example, you can check whether the set goals have been achieved by comparing
interim figures from your business administration with the budget.
The liquidity budget, which is part of your business plan,
is an even more detailed tool for comparing the company's results with the
overview of the expected income and expenses per month. Based on this monthly
evaluation, you can make timely adjustments to the business units where
necessary and then adjust the financial plan to the changed course.
A quick insight into the need for temporary extra credit
The liquidity budget is one of the 5 components of the
financial plan. In this part of the business plan, a multi-year plan is made of
your expected monthly income and expenses. Based on this liquidity plan, you
can make a good estimate of the periods in which you will need extra liquidity.
This allows you to apply for a credit extension or additional business
financing in good time. Here too, it is useful to periodically compare your
business results with the liquidity budget of your business plan so that you
can quickly respond to bottlenecks in the areas of:
·
Liquidity:
Can your company meet all payment obligations in the short term?
·
Solvency:
do you have sufficient equity to meet your interest and repayment obligations
in the long term?
·
Profitability:
is your company profitable, and what is the ratio between profit and total
business assets?
Well-considered cost price calculation based on your financial budget
If you are planning to launch a new product or service, it
is important to calculate the correct cost price. You can then determine the
sales price based on the cost price. The cost price is calculated by listing
the direct costs (such as raw materials, materials, working hours, etc.) and
the indirect costs (such as rent, energy, administration, telephone,
advertising, etc.) per product or service. If the selling price is higher than
the cost price, then there is a profit. The following applies; the lower the
cost, the higher the profit.
The various budgets of the financial plan form the basis for
the cost-price calculation. The operating budget, in particular, plays an
important role in determining the correct cost price. The business plan is,
therefore, the ideal tool for making a well-considered calculation of your cost
price.
Also, a business plan with a watertight financial plan?
Would you like personal advice on developing financial
planning for startups? Then Maven Business plans is happy to
support you in drawing up any financial budget for your business plan. For
example, do you want to start your own cafe? This way, you increase the chance
of success with your financing application.
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