Building Your Business Becoming an Owner Business Plans 6 Small Business Financial Statements for Startup Financing Financial Statements You'll Need for Your Startup Business Plan By Jean Murray Jean Murray Facebook Twitter Jean Murray, MBA, Ph.D., is an experienced business writer and teacher who has been writing for The Balance on U.S. business law and taxes since 2008. She has taught accounting, business law, and business finance at business and professional schools for over 35 years, has authored several books on saving money and simplifying your business, and was the owner of startup-focused company Emence Enterprises, LLC. learn about our editorial policies Updated on September 18, 2020 You're ready to start your small business and your're working on a great business plan to take to a bank or other lender. A key part of that plan is the financial statements. These statements will be looked at carefully by the lender, so here are some tips for making these documents SELL your business plan. Financial Statements You Will Need You may need several different types of statements, depending on the requirements of your lender and your own technical expertise. The statements you will certainly need are: A startup budget or cash flow statementA startup costs worksheetA pro forma (projected) profit and loss statementA pro forma (projected) balance sheet Your lender may also want these financial statements: Sources and uses of funds statementBreak-even analysis Putting these Statements in Order First, work on your startup budget and your startup costs worksheet. You'll need to do a lot of estimating. Note The trick is to underestimate income and overestimate expenses, so you can create a more realistic picture of your business over the first year or two. Then work on a profit and loss statement for the first year. A lender will definitely want to see this one. And, even though it's not going to be accurate, lenders like to see a startup balance sheet. Some lenders may ask for a break-even analysis, a cash flow statement, or a sources and uses of funds statement. We'll go over these statements so you can quickly provide them if asked. 01 of 09 Business Startup Budget A startup budget is like a projected cash flow statement, but with a little more guesswork. Your lender wants to know your budget - that is, what you expect to bring in and how much to expect to spend each month. Lenders want to know that you can follow a budget and that you will not over-spend. They also want to see how much you will need to pay your bills while your business is starting out (working capital), and how long it will take you to have a positive cash flow (bring in more money than you are spending). Include some key information on your budget: What products or services you are selling, including prices and estimated volumesKey drivers for expenses, like how many employees you'll need and your marketing initiatives A typical budget worksheet should be carried through three years, so your lender can see how you expect to generate the cash to make your monthly loan payments. 02 of 09 Startup Costs Worksheet A startup costs worksheet answers the question "What do you need the money for?" In other words, it shows all the purchases you will need to make in order to open your doors for business. This could be called a "Day One" statement because it's everything you will need on your first day of business. Include: Facilities costs, like deposits on insurance and utilitiesOffice equipment, computers, phonesSupplies and advertising materials like signs and business cardsFees to set up your business website and emailLegal fees licenses and permits 03 of 09 Profit and Loss Statement/Income Statement After you have completed the monthly budget and you have gathered some other information, you should be able to complete a Profit and Loss or Income Statement. This statement shows your business activity over a specific period of time, like a month, quarter, or year. To create this statement, you'll need to list all your sources to get your gross income over that time. Then, list all expenses for the same time. Note Because you haven't started yet, this statement is a called a projected P&L, because it projects out your estimates into the future. This statement gathers up all your sources of income, including shows your profit or loss for the year and how much tax you estimate having to pay. 04 of 09 Break-Even Analysis A break-even analysis shows your lender that you know the point at which you will start making a profit or the price that will cover your fixed costs. The break-even analysis is primarily for businesses making or selling products, or to set the right price for a product or service. It's usually shown as a graph with sales volume on the X axis and revenue on the Y axis. Then fixed an variable costs (those you must pay) are included. The break-even point marks the place where costs are covered. This analysis can also be useful for service-type businesses to show an overall profit point for specific services. If you include a break-even analysis, be sure you can explain it. 05 of 09 Beginning Balance Sheet A startup balance sheet is difficult to prepare, even if there isn't much to include. The balance sheet shows the value of the assets you have purchased for startup, how much you owe to lenders and other creditors, and any initial investments you have made to get started. The date for this spreadsheet is the day you open the business. 06 of 09 Sources and Uses of Funds Statement Large businesses use Sources and Uses of Funds statements in their annual reports, but you can create a slightly different simple statement to show your lender what you need the money for, what sources you have already, and what's left over to be financed. To create this statement, list all your startup and working capital(on-going cash needs), how much collateral you will be bringing to the business, other sources of funding, and how much you need to borrow. 07 of 09 Optional: A Business Requirements Document A business requirements document is similar to a proposal document, but for a larger, more complex project or startup. It gives a complete picture of the project or the business plan. It goes into more detail on the project that will be using the financial statements. 08 of 09 Include Financial Statements in Your Business Plan You will need a complete startup business plan to take to a bank or other business lender. The financial statements are a key part of this plan. Give the main points in the executive summary and include all the statements in the financial section. 09 of 09 Finally, Check for Mistakes! Before you submit your startup business plan and financial statements, check this list. Don't make these common business plan mistakes! Check all numbers for accuracy and consistency. Especially make sure the amounts you are requesting are specific and that they are the same throughout all the parts of your business plan. Was this page helpful? Thanks for your feedback! Tell us why! Other Submit Sources The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy. SCORE.org. "How to Set Up and Maintain a Budget for Your Small Business." Accessed Sept. 10, 2020. SCORE.org. "Financial Projections Template." Accessed Sept. 10, 2020. Harvard Business Review. "A Quick Guide to Breakeven Analysis." Accessed Sept. 10, 2020.