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How Do I Create a Simple Sources and Uses of Funds Statement for Startup?


Question: How Do I Create a Simple Sources and Uses of Funds Statement for Startup?
Large public companies include a Sources and Uses of Funds statement in their annual reports. The worksheet discussed here is a simplified, slightly different version that you can use to show a lender how much you need for startup financing and how much collateral you will contribute. Lenders like it because it is an excellent summary of your financial plan.
The statement shows what you need money for (from your Startup Costs worksheet),

Create a Sources and Uses of Funds Statement

  1. Section One is "Uses of Funds". In this section, use the subtotals for each section in your Startup Costs worksheet: Facilities, Equipment and Vehicles, Supplies and Advertising, and Other Startup Costs. Total these numbers.
  2. In the Uses of Funds section, include an estimate of your Working Capital needs - that is, the amount of money you need to have on hand to pay bills while you are establishing your business.
  3. The total of startup funds and working capital needs is the total Uses of Funds.
  4. In the Sources of Funds section, list all the sources of funds you can provide, as collateral for the loan you are seeking. This might include equity in your home, a savings account, an IRA (you don't have to cash it in, just be willing to let the bank take it if you can't pay on your loan).
  5. The difference between the total Uses of Funds from section one and the total collateral you are providing equals the amount of financing needed.

An example:
Uses of Funds
Facilities Costs $120,000
Equipment and Vehicles $325,000
Supplies and Advertising $49,000
Other Startup Costs $13,000
Total Startup Costs $507,000
Working Capital Required $100,000
Total Uses of Funds $607,000

Sources of Funds
Owner Collateral:
IRA $50,000
Owner Savings $10,000
Home Equity $30,000
Total Collateral $90,000
Total to be Financed $517,000
Total Sources of Cash $607,000

This statement does not have to be complicated; it is just meant to show a lender how much you need for financing, what you have as collateral, and the amount of loan you need. In some cases, you may not actually be putting the money into the business (if you have an IRA, for example); you are just showing the bank what you can do if you are in trouble on the loan.

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