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Financing Plan

Meaning of Financing Plan

Posted on May 11, 2021May 10, 2021 by ablogtophone

The financing plan is an important tool in starting a business. It provides information about where the money for the company’s various resources comes from and is part of the business plan. A company or a start-up’s own funds are often insufficient to finance a company. It’s about the acquisition of machines and systems, the purchase of materials, the production of goods and the delivery to the customers. There are seldom enough funds available for this. A business therefore needs lenders to help with financing. The financing plan provides information on the amount of loans to be taken out. The financing plan also shows whether a loan is even worthwhile for the company. The financing plan also forms the basis for whether a company is creditworthy. The creditworthiness can be assessed by potential donors, but also by the company itself. The borrower can use the financing plan to make his own rating and assess whether he is creditworthy. According to lawfaqs, the financing plan can be used to determine how much money start-ups need to set up the company and what amount borrowed capital must be raised.

What must be considered in the financing plan

With the financing plan, entrepreneurs can show what amount of equity they want to contribute to their company and what amount must be paid for from outside funds. When founding a company, it is important that the start-up financing covers the entire capital requirement and that there is also enough capital available for unforeseen expenses. The financing plan must show the resources from which the financing is to be provided.

Financing from various means

Funding can basically come from various means:

  • Equity
  • Bank loans
  • Funding programs.

Entrepreneurs can start their own business without their own capital, but that is difficult. It is better to raise an amount of equity for self-employment. The more equity a start-up can raise, the better it is for him. Equity represents a security and a cushion of risk, with it financial bottlenecks that can lead to bankruptcy can be balanced. The more equity there is, the higher the creditworthiness of a company vis-à-vis potential investors. Companies willing to raise their own funds for financing instill trust in their lenders. Bank loans are mostly essential for starting a business. If the amount of equity capital is insufficient for starting a business and for the later successful existence of the company, bank loans are required. A bank loan can be applied for at the house bank or at an online bank. Not all banks grant loans for the self-employed or for start-ups, so it is important to compare the conditions carefully. When taking out a bank loan, it not only depends on the amount, but also on the duration. A short term leads to low interest rates, but it should be noted that the installments in each month still ensure sufficient financial leeway. When starting a business, it can make sense to choose a long term loan. Finally, the funding programs should not be forgotten in the financing plan. The federal and state governments offer loans on favorable terms, but also grants that do not have to be repaid. Promotional loans are characterized by low interest rates, long terms and often a time when there is no repayment.

The financing plan as part of the business plan

Business start-ups should draw up a business plan. In order to save time, our free business plan template is suitable for downloading with a prefabricated and individually adaptable structure!

The financial plan is an important part of the business plan. It should contain information about the total capital requirements for acquisitions and up-front costs as well as about liquidity reserves during the start-up phase. If loans are to be taken out, the collateral for the loans should be shown. A liquidity plan is part of the financing plan; it must contain information on monthly payments, monthly costs, investment costs and liquidity reserves. An earnings and profitability forecast is also part of the financing plan. Sales must be estimated over a period of three years, and costs and profit must also be estimated over a period of three years.

If you are looking for a free financing plan template, you are welcome to download our financing plan template .

Financing Plan

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