Estimating Your Cash Flow for a Small Business Loan Proposal

A Home Business Article Contributed by Marsha Maung

Estimating Your Cash Flow for a Small Business Loan Proposal

I need a calculator when I go shopping: that shows how blind I am when it comes to numbers and if I can write a small business loan, the 4-year-old kid next door can too.

And one of the most important part a loan officer would look at when they're considering your small business loan application is the cash flow projections section. This section outlines the cash in and cash out of your business accounts - when you'll be spending money and when you'd be expecting money.

New Small Business: How to Project Your Cash Flow for a Loan

First, let's look at the potential revenues, that means potential income from your business. To project your startup revenue, you'd need to make reference to a business like yours. For instance, if you're going to be selling mobile phone accessories online, you'd have to research on the company and their revenue.

Often, libraries and book stores will have a general guide on how to come up with a revenue projection in order for you to come up with a realistic overview for your small business loan proposal. All you have to do is to go to the library and check out the section with publications on how to do sales forecasting.

One note, thought, be sure to include sales made only for cash payments you received for that month. This is applicable for small bsinesses that gives credit to their clients/customers. If you give your clients a 180 day credit, then your sale should only be included in the month that you're due to collect the money from your client.

Step Number 2 to Writing a Good Small Business Loan Proposal : the Expenditure

The same rule as above applies. Only include the amount that you're going to pay for that particular month. For example, if you have received an invoice from your supplier and the payment is due in 30 days, you only include the projected expenditure in the month that the payment that it's due.

For a small business, we're not really expecting you to include salaries but if you have a staff or two, don't forget to include that into your cash flow projection plan. The loan officers would definitely be interested in THAT. Don't forget the overhead costs like electricity bills, mobile phone and phone bills, Internet access, water and traveling expenses. They should all be recorded under the expenses column.

Don't Use Your Cash Flow Projection from a Different Business or from a Previous Year for This Small Business Loan Proposal

Every single business is ALIVE and continues to change. Even as you're reading this article, market trend is changing, projections change. You may have gotten your hands on someone else's cash flow projection document and you're thinking of plucking the figures from there and planting it into your small business loan proposal? It's not going to work.

Bear in mind, loan officers have a wide range of resources to tap into when they're trying to decide whether they should approve your loan or not. If your cash flow projection for your small business looks fake or unrealistic, they'll chuck it out of the window faster than you can say 'please'.