Financial Planning Overview

Using Money Effectively

Financial planning is just as important in business financial planning as it is in personal financial planning.  Your business must manage money effectively in order to survive and control debt much like an individual.  Businesses are all different in terms of financial need, but chances are as a small business in its early years, times will come when you need to ask for financial assistance or reevaluate your existing finances in order to keep your business growing.

There are a number of things to consider before approaching a loan officer however.

• Financial Planning is actually closely related to your Business Plan.  Have you considered your finances when constructing your business plan? (Create your business plan here)
• How is your cash flow? Is the need for outside assistance absolutely necessary or are there opportunities to reallocate your existing finances to make ends meet? (Note: the loan officer will evaluate your existing resources in detail- including your personal finances if your business history is short)
• What is the timeframe and circumstances of the needed financing?  As with most credit applications, the sooner the money is needed and the more dire the situation, the more it will cost (or the more difficult it may be to obtain).
• Consider factors outside of your business such as the state of your industry.  Can you prove that your industry is growing and your business will be a key player or has your business been a bright spot in an otherwise gloomy industry?
• Can you display a consistent, successful management record?  Just as a shareholder wants to know the record of success of the key executives controlling the finances of an organization when choosing a public company to invest in, a loan officer will want to evaluate your proven management strengths when assessing financial assistance for your business.

How do loan officers evaluate candidates for financial assistance? Learn about the credit process here.

How to Conduct Financial Planning

Even if you do not need to ask for financial assistance just yet, you should still be devoting the time and energy required for financial planning.  This is something that should be done at least once a year in order to develop a budget and project expenses for the coming year.  Yearly financial planning is usually conducted using Excel spreadsheets to both evaluate the finances of the previous year and estimate the expenses of the coming year.

Get free financial planning templates here!