How to Write a Simple Business Financial Plan

One of the most important documents you should have is a business financial plan. A carefully crafted, well-thought out plan can help you determine your current, and future cash needs. In addition, most businesses will be unable to borrow money, factor contracts, or establish lines of credit unless they can provide a financial plan to their lender.

What Information to Include in a Financial Plan

Your financial plan is not only necessary, and helpful for potential lenders or investors, but it can also be an invaluable tool for you to determine what steps to take in your business. The ideal financial plan will have multiple sections including:

1. Current Financial Status– business assets, cash on hand, outstanding debts, and outstanding accounts receivable should be carefully recorded. Once you have completed recording all items, you should create a balance sheet showing your current financial status. SCORE (Service Corps of Retired Executives) has a template designed for small businesses, but may be used for a business of any size.
2. Prior Financial Statements– unless this is your first full year in business, your financial plan should also include your prior years’ financials. In most cases, a completed tax return will suffice, but it is also a good idea to have the complete breakdown of the monthly income and expenses available for review if requested.
3. Projected Financial Analysis – it is important to project your income, expenses, and earnings out past the date you are seeking financing. In most cases, a three-year projection is sufficient; although in most cases, business owners are encouraged to look ahead five years. Ideally, your financial projections should contain the following:

Sales

Cost/ Goods Sold (COGS)

Gross Profit

Operating Expenses

Salary (Office & Overhead)

Payroll (taxes etc.)

Outside Services

Supplies (off and operation)

Repairs/ Maintenance

Advertising

Car, Delivery and Travel

Accounting and Legal

Rent & Related Costs

Telephone

Utilities

Insurance

Taxes (real estate etc.)

Interest

Depreciation

Other expense (specify)

Total Expenses

Net Profit Before Taxes

Income Taxes

Net Operating Income

Always keep your projections realistic; a lender will ask you the basis of your projections and you should always be prepared to explain why you have chosen the numbers you did. Remember, things like fixed costs of rent, insurance, and real estate taxes may increase over time; take this into consideration when preparing your projections. This section should be based on your current income, expenses, etc. Do not include any projections that would include funds borrowed.

1. Develop a Cash-Flow Statement – using your financial analysis as a starting point, you will also need to develop a cash flow statement. This should cover the same period as your financial analysis but contains additional information. When preparing these statements, you should take into consideration the amount of money you are planning to borrow, changes in staffing, and any new investments you plan to make in equipment, or inventory. If you are planning on pursuing new contracts, any projects you anticipate will be successful should be carefully recorded as well.
2. Breakeven Analysis – hopefully before you seek financing, your business is already profitable. However, if it is not, you should develop a breakeven analysis after you have developed the other parts of your financial plan. This is important; a lender will want to be assured their investment will bring your business towards profitability.

Financial Plans: Not Just Valuable For Lenders

When creating a financial plan, it is important to keep in mind, it is not only useful for lenders. Business owners can, and should review their financial plans from time to time to determine if they are on track with projections, or if they need to readjust their projections. Looking at where your business finances were in the past, and what you anticipate doing in the future can help you achieve realistic goals, and help you set new goals for your business. Business owners who set realistic goals, and have ideas for meeting those goals, are more likely to find long-term success.

Financial plans for your business need not be complex; however, they should provide actual data.

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How to Get a Secured Business Line of Credit

Business lines of credit can provide you with capital, but, more importantly, they provide flexibility. Unlike a traditional loan, when you use a line of credit, you are in control of how the funds are spent. In addition, lines of credit typically carry a lower interest rate than credit cards, offer low monthly payments, and can be used repeatedly as you make payments. This makes them an ideal funding option for many companies. However, for some, a lack of credit history, weak credit, or other factors may mean the only option available is a secured line of credit.

When business lines of credit are helpful

If you are doing business in construction trades, service industry or you are a wholesaler, a line of credit can make the difference between winning and losing a contract. Many times, you will need immediate cash to bid on a contract; you cannot do this if you have limited cash flow – a line of credit could give you that option.

A line of credit can also help you through temporary cash flow issues. You may have cash coming within a couple of weeks but need immediate capital to purchase a piece of equipment, make payroll, or purchase materials. Since a line of credit is renewable, you can spend it multiple times as long as you are making your payments, you have readily available cash for any purpose. Unlike closed end loans, you have complete control over how you utilize a line of credit. In many cases, a closed-end loan would result in the lender putting restrictions on how the funds may be used.

Benefits of a line of credit

In addition to being helpful to allow you to fund immediate needs, and address temporary cash flow problems, there are other benefits of a line of credit including:

• Flexible payment terms
• Access to cash on demand
• Building business credit
• Flexibility in using funds
• Lower interest rates than credit cards
• Improvement of cash flow
• Control of cash
• Separation of business and personal credit

As you can see, the benefits are significant and can help you ensure your business continues to thrive in a competitive marketplace.

Obtaining a line of credit

When you are unable to secure a standard loan, or your credit does not warrant an unsecured line of credit, you still may have options. Secured lines of credit are available for businesses who may not have established business credit; depending on the lender, you can use various assets for security including equipment, real estate, and in some cases, future income through offering liens on invoices, or purchase orders.

Why a secured line of credit?

Keep in mind, secured lines of credit have numerous benefits; for instance, you may only be required to make interest only payments for periods of time. You may also borrow between 50 and 80 percent of eligible assets; this means more cash on hand to grow your business. There is far less risk when using a secured line of credit; while you are building your credit using this funding option, you are also not going to have to worry about what happens if something goes wrong and you cannot make a payment. This flexibility alone is often enough to warrant considering a secured line of credit. We understand you want maximum flexibilty; in some instances, this is not available with unsecured lines, or with more traditional funding methods.

Capstone Capital Group: Understanding your financing options

Capstone Capital Group, LLC, offers business owners numerous ways to access capital they need for their business. Whether you need to have cash on hand to meet immediate need such as payroll, or you need access to a line of credit to help you bid on an attractive contract, we can help. Contact one of our service representatives today, and discuss the various options we can offer your business. We will take the time to review your immediate, and future needs and find the right solution to those needs.

We help small and mid-sized businesses get the financing they need to ensure their business remains financially stable, and to help spur business growth. We can discuss the various ways Capstone can help. Contact us today, whether you are considering a secured line of credit, or other financing options for your business. See what a difference working with a solutions-oriented lender can make for your business.

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Avoid These Four Mistakes When Choosing A Factoring Company

Factoring is one of the financing methods you can use to get the working capital to grow your business. However, like any other type of financing, it is important that you avoid some of the common errors made when you are selecting the company you will work with. Remember, while the process of factoring may be the same, there are some things you should avoid.

Working with a company who does not understand your business

One of the most important things you should verify is whether the factoring company understands your business. Keep in mind, many times, you need more than simply invoice factoring Read more: https://html.com/attributes/a-title/#ixzz4vi7MRdaf; if you need additional services, finding the right company is more important. Take the time to discuss not only the field you serve, but also discuss your business model with the factoring company. Remember, the right company may be able to offer you additional services. Find a factoring company that does not take a one-size-fits-all approach; it could be important later. Do not hesitate to ask a factoring company for references; most companies will not hesitate to provide you with the names and contact information of satisfied clients.

Ignoring the fine print in your factoring contract

While you may be tempted to accept an offer from the company that offers you the lowest fee, remember, you could be surprised by hidden fees. Review the contract completely and determine exactly what the company is offering, and what you are being charged for their services. You should also be wary of a company who asks for a long-term contract; remember, if you are tied to a long-term contract and the financial situation in your company changes, you could be tied to a contract that you no longer need, or want. Read the fine print; having an understanding of what you are agreeing to is imperative when you are working with any type of financing.

Not discussing customer service aspects of collection

When you enter a factoring relationship, you will be turning a portion, or all your accounts payable collections to the factoring company. You want to ensure your customers are treated with professional courtesy; remember, you could lose business if the factoring company staff members who are handling collection activities are not well-trained. Make sure the factoring company has well-trained staff; staff who uses best practices for collection, and customer service matters. This makes a difference.

Not understanding the terms of the contract

Once you have signed a contract with a factoring company, you are obligated to take certain actions. For example, you are required to ensure your customers are sending their payments to the factoring company, if you fail to do this, you could incur additional fees, or face other penalties. Additionally, you want to make sure you are forwarding the proper paperwork to the factoring company; if you are factoring invoices, do not send a purchase order and if you are factoring purchase orders, do not send invoices. Discuss all your obligations under your contract with your service representative so you fully understand what you have agreed to; this will prevent problems later.

Capstone Credit Group Has the Right Solution

We offer a broad range of products designed to suit your specific needs. Whether you need spot factoring of invoices, purchase order factoring, or lines of credit, Capstone has a solution designed to meet your needs. Because we offer such a broad range of products, we also work with a broad range of clients. We will take the time to ask you about your client base, your current payment schedules, and what your cash needs are going forward. Once we understand your specific needs, we will create a customized solution designed to provide you with the financial products that best suit your needs. We have also helped customers who need logistics assistance; and other customized services.

While you are looking for financing, contact Capstone Credit Group. Let us review your business, determine what products work best to meet your needs, and help you avoid many of the problems our clients have indicated they have had to overcome when working with other financing companies. We are happy to meet with you, review your invoices, and show how our products are superior. We also have a dedicated, well-trained team of customer service representatives; you will never have to be concerned about damaging your important customer relations – we believe the better your relationship with your clients, the better our relationship will be over time.

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The Role of the Financial Industry in Rebuilding After Hurricane Harvey

Some of the leading scientists have estimated the cost of Hurricane Harvey’s trek through Texas could result in some $160 billion in damage. Homes, businesses and ports suffered serious damage; the rebuilding process could take months, and in some cases, could take years.

Many Firms Offering Donations

While many financial, and payment firms have currently stepped up and offered donations to the Red Cross, offered to match donations made by employees, and other efforts. Many payment processors have provided free equipment to businesses to enable them to take payments, reduced fees on donations, and taken other steps to help.  Banks and credit unions have also received some guidance to consider waiving bank fees, increasing ATM withdrawal limits, and more. But there may be more the financial community can, and should do to help business owners get back on their feet.

Relief For Home and Property Owners

As many readers recall, during the financial crisis, homeowners were unable to make mortgage payments in light of increasing interest rates, and slipping home values. Imagine being told you need to continue making your mortgage payment while your home is a cesspool of water, mold, or has no roof. To enable homeowners an opportunity to file insurance claims, get back to work, and rebuild their homes, the major mortgage insurance providers including FNMA, VA and the FHA have stepped up their efforts to help homeowners and property owners. There are various forms of relief available depending on the lender’s willingness to help including temporary foreclosure relief, payment deferments and credit maintenance assistance. These temporary measures may be sufficient for most Texas property owners to claim their insurance and begin the difficult process of rebuilding, or rehabilitating their homes.

Business Lenders and Their Role

Lenders who focus on small, medium or large businesses also have a role to play in rebuilding in Texas after Hurricane Harvey. Businesses that were devastated need time to rebuild, get their businesses back on track, and increase their inventory. Businesses in Texas have a lot of work to do from discarding damaged inventory, making structural repairs, and in some cases, helping their employees get back on their feet.

Businesses with loans may be asking for forbearance on payments, seeking additional lines of credit to fund needed repairs, and need money to rebuild their inventory. Many offices, and factories suffered extensive damage; there have been some companies that have offered temporary office space to help these businesses get back to work.

Some of the options lenders can offer include:

• Modified credit requirements – since many businesses are unable to provide documentation on income, lenders may wish to consider lessening the requirements for obtaining new credit. Businesses can likely get prior years’ tax returns to show their income, but chances are high their documentation for the last 12 months will have been lost.
• Renegotiation of terms – since businesses will take some time to rebuild and return to full operation, lenders may wish to consider renegotiating loan terms to allow missed payments during the rebuilding period. This type of assistance can make the difference as to whether a business can return to full operation.
• Expedited processing – the loan process can be time-consuming and one luxury many business owners to not have is time. Money is needed to meet the demands of repairs, help ensure employees, many of whom are rebuilding their lives, are paid on time and that replacement equipment can be purchased as needed. Time is of the essence and lenders who can process loans quickly can help business owners get back on their feet faster.

Options for Business Owners

Businesses may see an increased demand for materials, products and services over the next several months as other businesses return to normal operations. However, this means more businesses than ever are going to need access to capital; it is often difficult to meet the demand of clients unless a business has immediate access to cash; it is necessary for every aspect of your business. You are going to need cash to pay employees, obtain raw materials, pay for shipping, etc. This is where Capstone Credit Group may be able to offer assistance to businesses in Texas, and those in Florida who are now facing the same type of devastation Texas faced a few weeks back. We provide a range of products designed to meet the needs of nearly any type of business including trade financing, invoice factoring, construction financing and factoring, etc.

During this period of rebuilding, Texas contractors will be assisting in the rebuilding of retail stores, office buildings, warehouses and more. We have specific programs designed to help contractors and sub-contractors get the cash they need in a short period of time. We offer fast approvals, we understand the challenges many businesses are facing during this period of rebuilding and we can help customize a solution that works to meet your needs.

If you are business owners, or a contractor in Texas, or any other area devastated by weather-related disasters and you need quick access to capital, contact Capstone Credit Group today and let us see if we can help you get back on a sound financial footing.

 

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