Financial budget
You need money to start or grow your business. A financial budget sets out how you will raise that money. Your financial budget is an improtant part of your financial plan Find out what to include in a financial budget.
Equity capital
The money you put into your business yourself is called equity capital. This could be savings, for example, or business assets you have already bought for your business. Such as a car or a computer. When applying for funding, other loans can also count as equity capital. For example, a loan from family or venture capital.
Borrowed capital
Borrowed capital is money that business financiers (banks and suppliers) are willing to lend you. You should include this as debt in your financing budget. There are two types of debt:
- Short-term debt. These are debts you must repay within 1 year. For example, an overdraft, supplier credit, taxes payable.
- Long-term debt. These are debts you pay back over a number of years. For example, a mortgage or long-term loan for inventory or business assets
Solvency
Solvency is the ratio of your equity to your business's total assets. It indicates the extent to which your business can meet long-term debts. Banks expect a starting business to bring in equity, usually a minimum of 30%. In some sectors, such as hospitality, this can be as high as 50%.
Your financial plan
You financial budget is part of your financial plan. This plan is made up of a total of 5 budgets.
Financial budget: in a financial budget, you set out how you will raise the funds for your investments.
Investment budget: your investment budget sets out the investments you want to make to start or grow your business. For example, machinery, a van, inventory, or business premises. Read how to draw up an investment budget.
Operating budget: in an operating budget you calculate your expected turnover, costs, and profit yfor the coming years. . Read how to create an operating budget.
Liquidity budget: in this budget, you list the expected income and costs of your business per month or quarter. Read how to make a liquidity budget.
Personal expenses budget: this budget gives you insight into how much money you need to live on.
Video Making a financial plan: investment and financing budget
You start your financial plan by making your investment budget and financing budget. KVK explains how to do this in the video Make a financial plan: investment and financial budgets..