| Your business plan’s financial section should | | | | they are, and may be less driven to keep the |
| include a chart showing where you intend to find | | | | business afloat and protect their investment. They |
| the necessary funding to launch the business, the | | | | would like to know that you are in the same boat |
| amounts from each source, and the specific uses | | | | as them and have made personal financial |
| of the capital you will raise. You must account for | | | | sacrifices as well as the usual sacrifices of time |
| the use of each dollar of funding within this chart. | | | | and energy. |
| To be convincing to funders, the uses must be | | | | Categories of Uses |
| complete, but not padded with unnecessary or | | | | The uses of funding will fall into different |
| inflated costs. The sources must also seem | | | | categories depending on the type of business you |
| reasonable to readers. | | | | are launching. These may include legal and |
| Choosing Sources | | | | permitting expenses, leasehold improvements on |
| The sources of your funding will depend on the | | | | a rented facility, equipment purchases, starting |
| type of business, the size of the investment | | | | inventory purchases (if you cannot buy inventory |
| needed, and the financial return you project. For | | | | on credit at this stage), marketing expenses, cash |
| small businesses needing only tens of thousands | | | | to cover the shortfall between your early |
| of dollars, venture capital funding is generally out | | | | operating revenues and operating expenses, and |
| of the question, but angel investor funding or bank | | | | additional cash reserves. Use a cash flow |
| loans are certainly possible. As the financial return | | | | statement to determine these final two |
| expected increases, investors and lenders with | | | | categories, as only by looking at how the inflows |
| higher tolerance for risk will become more | | | | and outflows will work over your first months or |
| interested. | | | | year will you be able to see what cash |
| The sources should generally include partner | | | | requirements the business will have to keep a |
| contributions. If you have no cash to put in, or | | | | healthy reserve in the bank to prepare for any |
| choose not to, funders will get the idea that you | | | | contingencies. |
| are not “on the hook” in the same way | | | | |