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Posted on February 11, 2014 @ 03:31:00 PM by Paul Meagher
You have a good idea but need capital to make it happen. You decide to pitch your idea to investors and see if you can find interested investors. You have a good idea and impress some investors who want to
do some follow up with you. They want to know more information about your business. This is where many attempts to raise funds potentially break down. Why? Because some entrepreneurs think fund raising
is all about the idea and haven't invested time into generating some basic financial information investors might want to know as part of their due diligence.
What financial information might that be? Most business plans are expected to include the following financial statements:
Income Statement
http://en.wikipedia.org/wiki/Income_statement
Balance Sheet Statement
http://en.wikipedia.org/wiki/Balance_sheet
Cash Flow Statement
http://en.wikipedia.org/wiki/Cash_flow_statement
If you are an existing business seeking funds, then you might be expected to have historical and projected versions of these financial statements. Your projected financial statements will be assessed for realism by your historical financial statements. If you are a startup, then you can only provide projected financial statements and these projections will be based upon industry and market research. Most banks will ask for these three statements when deciding whether to provide a commercial loan so it is reasonable to expect that a private investor might enforce a similar level of due diligence when deciding whether to invest in a business or not.
Now that you know what basic statements you might be expected to have on hand for business investors, you can do some research so that you are prepared in the event that potential investors ask you for them. The bottom line is that entrepreneurs should at least be familiar with these types of financial statements when seeking funding in case you are asked to produce them.
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