Whether you are considering the purchase of an existing business, the start up a new venture or simply refinancing some of your existing business debt, you will need to gather sufficient information for analysis. This process can also be beneficial to you, as the business owner, to understand the financial side of your business. Economic conditions, competition, and local issues can impact your business.
1. Write a good business plan that contains key components including an introduction, ownership structure, and market conditions. Your plan should be customized to fit your specific business and should contain supporting documentation.
Introduction should provide a description of the business, brief history, and your business goals, skills/experience of owners and management, and nature of the business. This may include résumés of owners and or members of senior management.
Ownership Structure should include the legal entity of the company (ex. sole proprietorship, partnership, corporation, Limited Liability Company, etc.). Each structure offers different tax and legal obligations and benefits. It is recommended that you consult a tax accountant and/or attorney to discuss the options.
This section should also list each of the principal owners and their percentage of ownership. Provide supporting documents such as Articles of Incorporation, Articles of Organization, Partnership Agreements, and Certificates of Good Standing. It should also contain a Corporate Resolution (if applicable) which identifies which officers have what authority. Further, identify needed licenses and/or permits and key providers such as accountant, attorney, and insurance agent.
Market Conditions should describe the business you are in, risks, target market, and competition. Describe sales strategies including signage, advertising, pricing, marketing, and promotions.
2. Gather Financial Statements and develop projections:
If you are looking to finance an existing business, you will need to gather the previous three years business financial statements. These year-end statements should include a Profit & Loss which outlines revenue, expenses, and net profit/loss. You may also need to correlate an interim financial statement which outlines year-to-date revenue and expenses. You may also be asked to provide copies of the previous three years tax returns.
If you are looking to start up a new business, you will need to project an itemized listing of revenue and expenses for the first 12 months.
The business should also provide a Balance Sheet, which itemizes all assets and liabilities of the business.
All owners with an ownership interest of 20% or more should also provide a signed Personal Financial Statement (Assets/Liabilities) and copies of most recent three years tax returns.
An existing business may need to provide an Aging of Accounts Receivable and Payable.
3. Identify Financial Needs:
If you are applying for a new loan, you will need to summarize the estimate of all start-up costs or prepare an itemization of anticipated credit needs. This might include land/building acquisition, new construction, expansion, leasehold improvements, inventory purchase, working capital, business acquisition, or equipment needs.
If you are using existing collateral for the loan request, you should itemize all collateral by make/model/serial number, and identify collateral with an original value of $5,000 or greater.
Contact Score® (Counselors to America's Small Business) for free and confidential business advice. To find the office nearest you, call 1-800-634-0245 or Ask Score at www.score.org. They offer local workshops, training, resources and counseling to assist you with planning, marketing and accessing small business tools and forms.
The U.S. Small Business Administration also offers resources and programs that target small businesses. Visit SBA online at www.sba.gov. The SBA also provides free online course, workshops, and forms at www.sba.gov/training.
Federal Self-Employment Tax or call 800-829-1040
Iowa Sales Tax or call 800-367-3388
Federal Payroll Tax - Call 800-829-3676
Social Security or call 800-772-1213
Worker's Compensation - Iowa Workforce Development - Call 515-281-9619