What financials are need for a business plan?

[s.ruddell]

I'm in the process of going through my business plan for a start-up that i'm working on and the business plan is almost finished except for some last reviews.

A little bit about the business:

• Its a start-up to get into real estate wholesales

• It aimed at getting start-up capital in the amount of $10,000 to be used for earnest money deposits on foreclosures

Thats just a basic outline if you have any other questions about the business or business plan, let me know.

My question is though, what financial documents should I include with my business plan? And where do I find them?

[DerekS]

Is this business plan to woo would-be investors to lend capital. Like limited partners?

Or is this to secure financing from a bank in the form of an amortized loan?

[s.ruddell]

Its will be for getting an amortized loan from a small local bank but I may also take it to one of the private lenders that I have lined up for my buyers and see if he would be interested in providing the loan only because the business I do will promote his business when my buyers need a lender for one of my wholesale properties.

[ethansmith]

The three main financials used in a business plan are

1) Income statement --- basically states profits and losses

2) Balance Sheet --- basically states assets and liabilities

3) Statement of Cashflows --- tracks cash going in and out.

Hopefully this is some helpful info for you.

[byrneof]

The three main financials used in a business plan are

1) Income statement --- basically states profits and losses

2) Balance Sheet --- basically states assets and liabilities

3) Statement of Cashflows --- tracks cash going in and out.

Hopefully this is some helpful info for you.

You should also include your assumptions so that people know that you didn't pick the figures from thin air.

[DerekS]

At minimum- in order to get a mortgage, you'll need paystubs and the past two year's W-2s. You may also need bank statements, etc.

If you plan on purchasing multiple properties, it gets more difficult. If you need to secure construction/rehab financing you'll need an estimate from a licensed contractor (or multiple) so that you can budget for materials/labor cost, etc.

Even if you're seeking the rehab funds through alternative financing, like an investor- they'll probably want to see the same data. Proof that you've budgeted out the repairs, budgeted for overages and breakage, and can also cover your debt service through the rehab process as well as the lease up or disposition process (whichever model you're seeking.)

Other options include seeking out a hard money lender, who will also want to underwrite the loan in similiar terms, but will probably be more forgiving because he or she will be charging you a much higher interest rate.

Make sure you do your homework and leave plenty of $$$ on the table for holding periods.

[s.ruddell]

Derek, I'm actually not purchasing properties. I'm going to be wholesaling them. Its basically selling a sales agreement to a property. Its a little more complicated then that but thats just the basic idea.

Anyways, with my should I show balance sheet and income statement for the end of my fiscal year or month by month or how should I show those projections?

[DerekS]

I know what you're doing- you're looking to negotiate the price of a property down, ratify a contract, and assign it to another buyer at a higher price. An assignment contract. This was done alot during the "boom."

This is a business that requires alot of cash, because it is nearly impossible to predict demand for properties you're trying to assign. If you negotiate a property listed at $100,000 down to $50k, there's no guarantee that you'll lock an assignee down somewhere in that margin- ensuring a profit for your investors. At least not in this market. It can absolutely still be done, but it's hard to predict demand in a down market (I don't know how your local market is, but mine is the DC Metro area which is relatively strong and assignment contracts here are few and far between.)

You'll need to show that you have a contingency plan (ie the ability to close the deal if you can't assign it, rehab it, and relist it at a market rate that will turn a profit.) Or the ability to band-aid it, offer it for lease, and execute a lease so that your debt service can be covered while you wait for the market to recover.

If you've done this before, your financials (in whatever form they take) may be enough to woo investors because they show past success and an understanding of the changing market.

All the investors I know are very adaptable guys, but they don't want to see numbers on a piece of paper and a business plan unless they show instances of either past experience, or a deal in the works that offers such windfall profits that "even if it goes wrong, it can't go wrong." At least that's the mentality that I've been seeing recently.