A Three-Statement Model of Financial Modeling in a Bank Business Plan

Let’s assume that you want to build a new financially sustainable business, but you need some funding. To raise the funding, you will go to a bank, and ask for a loan. Asking a simple question is easy, but convincing a banker to fund your business is not easy at all. You need to provide your banker a bank business plan. A Bank Business Plan for your business is like an ID for you, without it, no one will have any data on you or your business.

A bank business plan is an overview of your company’s goals and future, and what will you do, as a business owner, to achieve them. Before composing a bank business plan, you need to do Financial Modeling, which can become your worst nightmare if you do not know how to set it up.

Financial modeling is the process of creating a dynamic, working summary of a company’s expenses and earnings in a form of a spreadsheet. The information about your company’s expenses will affect the banker’s decision about the loan.

Here is a three-statement model of financial modeling in a bank business plan.

Income Statement Model

The income statement model results in the projection that allows you to present your company’s profits and losses by showing revenue and costs. This way, the banker can have a clear vision of the financial state of your company. Tracking an income statement is very useful because it can help you determine how to make a profit. It will help you decide things like whether to increase revenue by decreasing costs, remove unprofitable products or services, decreasing inventory, etc.

To be a successful entrepreneur and have useful financial modeling in a Bank Business Plan, track and analyze your existing income statement then make reasonable predictions about the future.

Cash Flow Statement Model

The cash flow statement model allows you to visualize how cash is flowing in and out of your business. This statement model shows the banker what happens to your money on a monthly basis. Put yourself in a banker’s shoes. If you are likely to loan money to a business, you will want to know if the person owning that business is reliable. A banker will want to see what happens with the money in your company and how you manage it. By looking over your cash flow statement model, the banker will know if you can fund your day-to-day operations or if you have a debt or not.

Balance Sheet Statement Model

A balance sheet statement model shows “how rich” your company is – or who owns it. This financial statement model represents assets, liabilities, and shareholder’s equity in your company. It is called a “balance sheet” because the sides of this equation must be balanced. For example, if a company takes a ten-year loan of $20,000, its assets, as well as the liabilities will increase by $20,000. A balance sheet is the financial health of your company. As your doctor would like for you to be healthy, your banker will like the same for your company.

Financial Modeling is one of the most challenging parts of preparing a business plan. To compose a successful financial model that will lead to accurate projections, you need to know accounting, finance, and business metrics. A team of skilled Business Plan Writers can help you create a perfect bank business plan in no time!