Personal Statement Of Cash Flow Template Sba

3 Key Financial Statements You Need to Support your SBA Loan Application

Financial statements are an essential barometer of business success, both past and future. As such they are a key requirement for any loan application. Many times, these can be submitted as part of your business plan, but it’s a good idea to prepare and have them ready in case you are required to submit them individually.

The key financial statements to prepare as part of your SBA loan application include: balance sheet, profit and loss statement (also known as your income statement), and cash flow forecast.

Together these documents provide a comprehensive view of your financial situation. Many of these can be created and generated automatically within your accounting software or with the help of an accountant. Whichever method you use, below is an overview of each statement, why they matter, and tips on preparation.

Balance Sheet

The balance sheet is often the first financial document that any lender will look at since it gives a snapshot view of the fiscal health of your business. The balance sheet shows what you own (fixed and current assets) versus what you owe, plus any shareholder investment. If your assets outweigh your liabilities then this indicates a strong fiscal position, and vice versa.

As such, a balance sheet is a useful indicator of your company’s worth, stability and liquidity (something any lender will look for). It’s also a useful tool for helping you identify trends and develop strategies to capitalize on your strengths or mitigate any weaknesses.

As a rule of thumb your balance sheet should be compiled monthly or quarterly. For established businesses, plan on providing balance sheets for the past three years and a projected balance sheet for at least two years.

You can download a free balance sheet template from SCORE.

Profit and Loss Statement (and Projections)

The profit and loss (P&L) statement provides an overview of how your business is doing over time. It breaks down revenues and expenses and gains and losses over a specific period (usually monthly, quarterly, or annually).  Lenders will look for P&L statements for the past three years.

For a loan application (and a must if you’re a start-up), you should also prepare a P&L forecast outlining your sales and expense projections for two years. Again, SCORE provides a useful template for this projection.

Cash Flow Forecast

Your cash flow forecast (also known as a projected cash flow statement) is perhaps one of the most vital financial statements for ensuring your business stays solvent and for securing a business loan.

Your business may be profitable, but if there’s any discrepancy between the timing at which cash flows into your business and the rate at which it exits the business, then you could be looking at a cash flow problem. For a lender, this reflects poorly on your ability to repay a loan.

Projecting your cash flow is a vital exercise for understanding and managing the flow of cash in and out of your business, and gives you sufficient window to put measures in place to mitigate a cash drought.

For the purposes of a loan application, a cash flow forecast should be prepared for at least the next 12 months (both established and start-ups). Key data to include are assumptions about incoming cash (use your sales forecast to inform these numbers), expenses (fixed and variable), and any financing you may already have in place, such as a business line of credit. Refer to your P&L projection and annual trends to estimate when you expect cash to come and go, not just when sales are forecast to close. For example, you may close a deal in June, but the client may not pay you until August.

Use this 12-month cash flow template from SCORE to guide your forecast.

Another useful cash flow tool, although not typically required as part of your loan application, is the cash flow statement. Instead of looking forward, the statement looks back at when cash entered the business and when it exited. Updated monthly, this is a useful tool for understanding how much cash your business is generating and when. It can also inform your cash flow forecast since it provides an accurate picture of when you’re getting paid in relation to when that cash exits the business.

The Bottom Line

While each financial report or statement has value, preparing and maintaining them holistically will not only support your loan application but help you make smart business and investment strategies.

Tip: In addition to these statements, you’ll also need to provide copies of business and personal tax returns for the past three years (with your permission First Bank SBA can take care of pulling this data) and bank statements (going back 12 months).

If there's just one formal business skill every business owner should have, it's understanding and forecasting cash flow. It's not intuitive because it's not the same as profits; but it's vital. We spend cash, not profits.

Here's my recommendation for a relatively simple way to lay out cash flow in a spreadsheet, so you can see it. It doesn't take a CPA or an MBA to do it ... just knowing your own business.

Do Your Numbers

Making Your Estimates

  1. In lines 3 and 4, you forecast the revenue from sales. Yours might be just cash sales, a single line. If you have sales on account, you know it. If you're not sure (maybe you're looking at a startup so you don't have the experience yet), assume you do have sales on account if you sell to other businesses; and probably not if you sell to consumers. Line 4 is your prediction for when the business customers will pay invoices.
  2. The "Start" column reflects the starting balances and starting funding for a startup. With an ongoing business, you might have that balance labeled "Dec" for the ending month of the previous year. In this example, the startup owner borrows $55,000 and gets $25,000 as new investment.
  3. Lines 5 and 6 are important because new money from loans and investments doesn't show up in your profits, but it's there.
  4. That whole block of rows 3-6 is a simplification. You know your business. Where else does money come in? Maybe you're selling assets too? Stay flexible. Take this simple example as just that, an example. Make yours specific to your business.  
  5. Rows 9-10 are also simplified. Use as many rows as you want to estimate operating expenses, focusing mainly on fixed costs, rent, utilities, and payroll.  
  6. Row 11 is there to make the point that cash flow counts what you spend for inventory and other direct costs of sales, when you spend it – not when it shows up in profit and loss. When a bookstore spends $10,000 in November to buy books to sell, those books might not show up in profits (as cost of goods sold) until December, January, or beyond ... but that money leaves your bank in November. So you put it into your cash flow in November. If you don't sell products, and don't deal with inventory, then you might have a row for direct costs such as hosting, or customer
  7. Row 12 is there because most businesses pay a lot of expenses at the end of the month, or 30-45 days after received. For example, the ad you place might come through as an invoice that you'll pay later. Row 12 is for all those things you pay later. And, just in case you're keeping track, these are expenses, including tax and interest. The projected interest on that $55,000 loan is included there.
  8. Rows 13 and 14 show two items that are often forgotten in cash flow planning. Principal payments on debts, and buying new assets, don't show up in profit and loss. But they cost money that goes out of your bank account.

Simple Calculations

As you can see in the illustration, row 7 sums the money coming in, row 15 sums the money going out, row 16 shows the cash flow for the month, and row 17 shows the projected cash balance. You can see from the illustration how the cash flow is the change in the cash balance, and the cash balance is the equivalent of checking account balance; it's how much money you have.

The Key is Using it Right

First, tailor your cash plan to match the actual details of your business. This is a very simple example. Be flexible about adjusting it so it matches your business, and your bookkeeping,

Second, using it correctly requires keeping it up to date. Review it every month. Calculate the differences between what you expected and what actually happened, and make adjustments.

You never guess right. And this is all guessing. What matters is watching carefully and updating so you can react to changes in time.

Like all business planning, the value is in the decision. The business value of cash planning is the decisions it causes.

About the Author:

Tim Berry

Guest Blogger

Founder and Chairman of Palo Alto Software and bplans.com, on twitter as Timberry, blogging at timberry.bplans.com. His collected posts are at blog.timberry.com. Stanford MBA. Married 46 years, father of 5. Author of business plan software Business Plan Pro and www.liveplan.com and books including his latest, 'Lean Business Planning,' 2015, Motivational Press. Contents of that book are available for web browsing free at leanplan.com .

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