Financial budget
In your financial budget, you set out how you will pay for the investments you need to make for your business. This money can come from private money (equity) or loan capital. Read how to make a financial plan.
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.
Loan capital
Loan capital is money that business financiers (banks and suppliers) are willing to lend you. There are 2 types of loan capital.
- Short-term debt. These are debts you must repay quickly. 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).
Solvency
Solvency is the ratio of your equity to total required capital. 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%.
What should a financial plan include?
A financial budget is one of the 5 budgets that make up your financial plan. The other 4 budgets are:
Investment budget: your investment budget should include a list of the investments you want to make in your business in the coming years. For example, machinery, a van, or business premises. Read how to draw up an investment budget.
Operating budget: in an operating budget you set oin this budget you ut how much profit you expect in the next 3 years. And how much turnover, and how many costs. 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 insifght into how much money you need to live on. Read KVK's advice on how to draw up your personal budget.
Video Making a financial plan: investment and financing budget
You start for your financial plan by making the investment budget and financing budget. KVK explains how to make these in the video Make a financial plan: investment and financial budgets.