Financing plan: why and how to establish it ?

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A financing plan is a management forecast table. It allows you to calculate the financial means necessary for the realization of your project and thus to validate its viability and profitability. It is an essential tool for the financial management of your activity.

What is the purpose of a financial plan?

It is essential for the creation of your company and the start of your activity. It can also be justified later in the context of an investment to be made, in particular in the event of a request for financing from a bank. In this case, the financing plan may be simpler than at the creation of the company.

The investment may significantly affect your operating cycle (for example a strong development of your turnover). In this case, a more in-depth analysis will be necessary.

How to build your financing plan?

You must draw up a list of the investments required at start-up and the expenses related to the operation of your business. It is in fact a question of making an inventory of your needs and resources, the capital required to finance these expenses.

The financing plan is presented in the form of a table with 2 columns :

• your needs: in investments (premises, equipment...) and your operating expenses (stocks, customer accounts, cash flow needs).
• your resources: personal contribution, that of the associates, aid and envisaged credits (loans, of payment of a supplier...).
• To note : The totality of the needs must be covered by your resources.

What are the needs and expenses of your company?

The financing plan includes certain expenses that are indeed necessary for your company: long and medium term needs and short term needs.

We speak of fixed assets when the goods concerned by the investments are intended to be used durably within your company. They can be :

• intangible (non-tangible assets such as goodwill for example),
• tangible (buildings, vehicles owned by the company)
• or financial (such as a deposit or a guarantee).
• These are long and medium term needs.

The need for working capital corresponds to the time lag between the expenses you incur (purchase of stock, personnel costs, etc.) and the revenues (sales proceeds) you receive. If the expenses are earlier than your receipts or more important on a given period, the need of working capital is then positive and becomes a short-term need.

The need for cash is also a short-term need; it corresponds to the expenses related to the daily operation of your company.

What are the resources of your company?

The resources correspond to the sums invested in your company, to those borrowed in the medium and long term or to short-term credits.

The equity is a durable or even permanent resource that will remain in your company. It can be :

• your personal contribution,
• sums brought to the capital of your company by your family (family contribution) or your partners,
• subsidies, aid from the State or local authorities.

Medium and long term credits are resources adapted to finance sustainable investments in the company. They can be loans :

• honorary loans (repayable without interest),
• assisted (repayable with reduced or deferred interest),
• bank loans (repayable with interest)...

Short-term loans are adapted to meet a need for cash flow after the start of your activity. It can be about :

• delays obtained from suppliers,
• cash flow loans,
• credits by mobilization of receivables.

What precautions should be taken for your financing plan?

Evaluate correctly the amount of your own funds because for third parties (suppliers, bank...) the proportion "personal contribution/debt" is a sign of the solidity of your project and of your commitment to it:

• The higher your contribution, the greater your independence from your creditors. You will be able to carry out the commercial policy that you wish.
• Do not underestimate your needs: you risk causing an imbalance in your cash flow when it will be necessary to face the corresponding real expenses.
• It is important not to invest all of your resources in order to keep a margin of maneuver in case of difficulties (unforeseen expenses or delay in the start-up phase of the activity).
• Opt for adapted financing: finance a long-term need with a long-term resource because a permanent need requires a stable resource (contribution, medium or long-term loan).

Note: to prepare your financing plan, you can also be accompanied by a chartered accountant, an approved management center, a support network for creation (association, service of a community...), a management store...