Climbing up the ladder of the business industry is a tough call for entrepreneurs and their investors as well. Varieties of business forms, agreements, a set of appropriate rules for the company’s bylaws, and the right choice of people are needed to sustain a business. With this, the business owner must have a ground for his or her vision especially on how he or she can manage the business’s finances and how to acquire the ample amount of finances to open up his or her company.
What Is a Sources and Uses of Funds Statement?
A sources and uses of funds statement is an essential document that a business owner must construct to enable him to convince a business loan lender. This statement form contains the summary of the business’s financial statement along with its business plans. The document also allows the people involved in the business to conduct an effective business assessment with regards to what they need for sustaining the enterprise and what they may need to compromise to meet the financial needs of the business itself.
The sources of funds of the business mainly refer to where the finances come from which may include the proceeds from a donation or loan as well as from the credit accounts of the business owners. As most loans will demand the borrower to include a specific property which can be held as a collateral in the event that the borrower will no longer be able to provide a payment for his or her loan. The collateral property which was stated on the loan agreement signed by the borrower has to be written on the table for the sources of funds to inform the other members of the business the amount of finance exchanged for the property.
The uses of funds on the other hand refers to where the finances will be heading or how they will be used for the benefit of the business. This includes the rental payments for the building where the business will be opened, the list of office supplies needed, as well as all the necessary operating expenses for the business. To assure that the statement form will be an effective document, the business owner or the management must list down every detailed aspect which needs to be financially provided to avoid dealing with issues that can hinder the success of the business.
Steps in Creating a Sources and Uses of Funds Statement
Commonly, a sources and uses funds statement has two sections categorizing the source and the allocations of the business’s finances. Below are the steps to aid you in creating this statement for your business:
Step 1: Make a list.
Your list must contain all the materials and supplies that you expect to purchase as well as the source where you may get your cash to purchase the line-item list that you created. This will serve as your draft to aid you in determining their category and their arrangement as you make a foundation of your financial statement.
Step 2: Open up a spreadsheet document.
With a spreadsheet document, you no longer have to deal with the alignment of each item since there are columns and rows which are already provided for you. You have to open two sheets for the uses and the sources to separate both. Additionally, you need to indicate the uses as the first section of your statement while the latter will be the second.
Step 3: Enlist the uses of funds.
Start with the general aspects and particulars, as well as the assets that you may need to purchase for your business. Beside each item should be their prices to determine their worth and let your business enterprise or company acquire a computation for the total expenditures. If you have already bought the materials, you need to review the purchase receipts and invoices that accompany the transaction to assure that you will be indicating the right amount on your statement.
Step 4: Include your sources of funds.
This second section focuses on where you can acquire your finances which should have the accounts that you use for buying the supplies, the title of your collateral property and the amount of the loan that you received from the lender.
Step 5: Total the amounts.
You should total the prices from your uses or the allocated purchases, as well as the number of funds that you have and will collect prior to the loan into their separate tables or spreadsheets. You may also indicate a few explanations for the lender to understand and to avoid an opening of various interpretations.
Sources and Uses of Funds Statement Tips
- Purchase the necessity. A businessman or owner must not be caught up in the excitement of opening his or her enterprise as well as gathering payment receipts from his or her purchased materials as this feeling may only lead to spending or demanding more from what is needed. With this, you must only list what will be used for the company or the business’s benefit and not for your personal needs.
- Compute the right prices. Plan a date on your business schedule form for a whole day where you will be heading to the market, and start canvassing prices and offers from various stores. By doing this, you will be able to compare each material, and this will allow you to save time and money for your business.
- Open options for possible sources. Do not limit your options from the credit cards that you currently have in your wallet or the loan that you can get from a lender. Rather, you should open up chances from donations and help from the people around you. Additionally, you should list the donation proceeds into your sources table along with the other amounts as well.
With the aforementioned steps, anyone can create a uses and sources of funds statement for their business needs. Nonetheless, it is essential to indicate the truth of each value and purchase to avoid facing financing problems due to unexpected business expenditures.
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