Financial Planning for Small Business Owners – Taking an SBA Loan

“Money does not dictate your lifestyle, it’s what you do to get it and how you manage your finances that determines your lifestyle.”  ― Wayne Chirisa

Whether small and mid-size businesses, they are actually what mostly consist of a striving economy. It is no question that entrepreneurship and creativity have been the biggest factors that brought about constant change in the economy for centuries. As an example proof of the importance of small and mid-sized businesses, the U.S. is known to have one of the best grooming environments supporting countless startups and small businesses to help stir the economy.

It is already considered a norm for business owners to spend several years building up their businesses. Basically, investing a significant amount of personal time and capital to help grow their companies, raise profitability, as well as ensure financial feasibility to last long against the competition with the old timer businesses. Most often than usual, these entrepreneurs will even place their family fortune locked in their business which doesn’t always result positively. Especially for cases when they’re too focused on operating their business that often the founders of small firms ignore or delay their own personal financial planning until they come close to retirement. To be prepared ahead of time is always better than proceeding blindly. Therefore, financial planning for small business owners became an important factor to consider to ensure their future.

So, to help with financial planning for small business owners, here are several practical steps that small business owners can follow to establish a successful financial plan from starting a business until retirement.

  • Goals (Business and Personal) – Distinguishing between what are your business goals and personal goals. Basically, setting up the short and long-term financial goals of your life. One cannot completely stick to their goals due to sometimes the line between the two gets blurred and interfere with each other. As an example would be trying out a new venture or launching a new product for your business and then also planning to save for college trusts for your children as well as saving for retirement. Both cases would require you to choose which to prioritize and put more capital, hence, there will be circumstances that you will have to choose to ensure better long-term financial success. However, it is possible to find balance with the two as long as you prepare a financial plan to achieve not only your business goals but also your personal goals.
  • Alternative Financing Sources – Whenever one starts a business, the need for financing is obvious. You could say that the success of such a venture depends on the small business owner’s ability to secure financing for the business. Securing financing is usually the most difficult hurdle for many entrepreneurs and small business owners. In most cases, using your own savings, asking for family’s and friends’ support are done to gather the startup capital of the venture. But of course, there are other sources that you can turn to an alternative outside sources such as loans, equity stake, angel investors, etc.
  • Budgeting – Whether for your business or for personal financial purposes, budgeting is a must. Simply by controlling your cash flows will make a huge difference for yourself and your business. Especially when running a small business, it is always not the case where your idea will generate revenue, hence, it is important to ensure that your company revenue should be higher than all the expenses incurred to operate your business. Tracking and analyzing every bit of your expenses makes a huge difference to stay on top and determine which variables need control and spot opportunities that you can proceed to raise more profit. And this, you can do with a proper budget plan for your business and personal life.
  • Liquidity – Cash is the lifeblood of any business whether small or large. It will always be needed to help maintain a healthy growth of any business, to be capable of funding for all the expenses incurred to run the business, as well as determine if a business is generating enough cash. This can be ensured with the right set of a business plan as well as a financial plan to prepare before starting the business.
  • Taxes – In this world, nothing can be said to be certain except death and taxes. You can’t really deny that the process of filing and paying taxes is very troublesome. Some even try to avoid and not pay at all which eventually end up really bad. There are, of course, different taxation laws depending on where you plan to build your business, hence, it is critical to speak to a professional such as a tax lawyer to assist you. Preparing in advance is the best approach to do as well as making sure to track all the tax filing dates to avoid missing the due date. No matter what kind of business you plan to build, you can never escape taxes.
  • Future Plans – Planning to retire early or securing your future? Then as a small business owner, you must not forget to include planning for your future. Though business goals and personal goals are different matters, you still need to build a solid plan for you and your family’s future. This means preparing for your retirement plan, insurance, trust funds, estate plan, and other savings plan that will help you live an easier life once you plan to retire or in case something happens to you. It is always better to prepare for what will come in the future and to secure yours’ and your loved one’s future.
  • Business Succession – Once your term’s over, it is a common event to leave your position to a trusted successor. Creating a solid business succession plan will help ensure not only you and your business partners but also your employees, contractors, suppliers, etc., which interests have an impact on your business. Of course, the complexity of the process of the succession will depend on the size of your business as well as the industry and legal status of your business. Though there are some cases where business owners prefer to pass down their business to family members or a relative.

Being the boss can be exhilarating. But there are also significant risks to proceed on your own. Unfortunately, the failure rate of small business is high, with only 50 percent of new businesses surviving for five years according to U.S. statistics. These survivors are either lucky or they know what to expect and doing as well as open their minds to lessons given by existing businesses and competitors. Persistence is also one quality since it is always not the case that a business will go smooth sailing depending on how prepared you are, hence, as long as you’re within the boundaries of your projections, then sometimes you just need to have a little faith.

Of course, it is important to adhere to what are needed to achieve success and these keys to success lie in proper budgeting, determining the right product for your market or audience, marketing that product, and then selling it at the right volume. What small business owners sometimes forget is that they need to adapt their own individual financial plans for the new realities and risks of being a business owner. One point should be clear when it comes to financial planning for the small business owner: the do-it-yourself drive that helped you start your business will not serve you well when it comes to managing the many financial issues created by that business.  This is where professional expertise often becomes necessary.  

Financial Model for Small Businesses

As a small business owner, planning for the future of your small business is an important part of success. But simply planning won’t help unless you build a solid plan on hand which you can refer to whenever you need help with creating financial decisions. Building a financial model is often what is done to create a framework of your business which will help solidify your business ideals.

Whether for small businesses or large corporations, financial modeling takes different shapes, but basically, it’s all about plugging important variables and running different scenarios into a formula which are very often built on an Excel spreadsheet and seeing the effect or results they have after fitting your business model.

A consultant once said that a well-built financial model will help a business owner understand the costs and profits from their management decisions. What will it cost to open a new location, hire a new employee, and how does that impact the bottom line? A good financial model can answer questions like whether your small business should buy a new piece of equipment or pay down debt too. That’s why using financial statements and market research will give you more accurate results. It’s even a good idea to consider a professional consultant to get an objective base to start from.

One of the best things that you can take advantage of financial modeling is, it is flexible and can be updated whenever you needed. There will be a time when your small business’ conditions change, so the need to always have the ability to run a new scenario to see the outcome is critical to ensure your business’ standing. In other words, building a financial model for small businesses can be very beneficial not only as a tool for decision making but also to prepare for what to expect in the future.

Getting a Loan – SBA Loan Calculator

Most often when starting a business, the capital on hand is not enough, hence, the need to apply for a loan as a financing source is inevitable. Though there can be other external sources which you can try to apply to get financing, getting a loan is often a better and easier choice. Especially for small business owners, taking a loan will be a long-winding process without the right set of tools to help ensure secure financing but it is also considered as an inexpensive way to get financing for their business.

Planning and securing a loan are actually the least things that business owners worry about. What’s more important is how to effectively pay back without having to pay more than what’s intended. Therefore, it is important to build a loan repayment schedule to plan the payment of the loan. One of the most common tools made convenient by financial modelers is an Excel Spreadsheet Loan Calculator for Small Business Owners.

Excel is a very useful tool since it is very flexible with various features that will help you calculate easier as well as it is transparent which basically gives the user a clear view of all the calculations and the logic of the spreadsheet. An Excel spreadsheet loan calculator will greatly help a business owner calculate the loan payment, set up a payment schedule, as well as project the interests according to the interest rate.

If you’re planning to apply for a loan backed by the U.S. Small Business Administration or most commonly known as SBA, the SBA Loan Calculator can be a useful resource to find out how affordable an SBA loan can be for small business owners. You will also learn more as you read the article included within the link provided for the SBA Loan Calculator to help you better understand about SBA Loans for small business owners.

You can also use some of our many Excel spreadsheet loan payments schedule templates to help you build your own financial model related to taking a loan or repaying a loan. These Excel spreadsheet loan payments schedule templates can be used as a base to start with or a reference about financial modeling for loans taken by small business owners.

The templates above are created by expert financial modelers who provided industry-specific financial model templates for different users from different countries such as the USA, UK, Canada, Australia, Japan, and many more who are in need of assistance with their financial modeling tasks.