Home Mortgage Broker Free Mortgage Broker Templates 8.1 Financial Statement Analysis Template
What is the financial statements template and how is it structured for a small business like Real Estate Funding Solutions ?
The center piece of any good business plan is its financial projections. When writing a business plan a business owner like Ryan Armstrong has to put together projected profit and loss statements, balance sheets and cash flow statements for 3 years. The purpose for doing this is of course to give the reader of the business plan for a small business like Real Estate Funding Solutions a sense of where the business is headed financially.
While there is no guarantee as to what the future holds for a small business owner like Ryan Armstrong, these pro-forma financial statements as they are known give the reader a good destination postcard of the financial well being of a small business like Real Estate Funding Solutions in the days ahead. The preparation of these statements present forward looking estimates and are not supposed to include any words that imply that these will come true. Thus we recommend that folks like Ryan Armstrong refrain from using words like guarantee or assure when describing their financial expectations.
Do lenders look at these financials for a small business like Real Estate Funding Solutions carefully before giving out business loans?
Yes. Most underwriting staff are trained to go almost directly to the projected pro-forma financial statements and get a clear sense of how the business is expected to perform in the coming years. While a lender or a business partner may not choose to hold you accountable for every minor detail that you have presented in the financial section of a business plan, you can most certainly expect to answer questions if the actual numbers that your business is able to deliver as time progresses are vastly different from the ones you have projected.
Thus if a small business like Real Estate Funding Solutions based in Rochester, New York has projected annual sales of $125,000 for the first year and the sales come in to more like $31,250 which is only 25% of the original projection, you can be sure that the business loan lender or partner investing in Real Estate Funding Solutions will have questions for Ryan Armstrong!
How is the financial statements template structured for a small business like Real Estate Funding Solutions?Our financial statements template for a small business like Real Estate Funding Solutions has five components as follows:
A. Input Modules - this section of the financial statements template, lets business owners like Ryan Armstrong input information in 9 key modules:
B. Annual Profit & Loss statement tab that gives Ryan Armstrong the ability to enter in the operating expenses for Real Estate Funding Solutions for 2012, 2013, and 2014. Besides the operating expenses, Ryan Armstrong also has the chance to enter in the key items like the Corporate tax rate for Real Estate Funding Solutions located in Rochester, New York along with the employer tax rate.
C. Monthly Profit & Loss statement tab that gives Ryan Armstrong the ability to enter in the seasonality of operating expenses and sales for Real Estate Funding Solutions for 2012, 2013, and 2014.
D. Balance Sheet tab that gives Ryan Armstrong the ability to manually enter any rare assets or liabilities that may be needed to complete the final projected balance sheet for Real Estate Funding Solutions for 2012, 2013, and 2014.
E. Cash flow statement tab that gives Ryan Armstrong the ability to manually enter any cash flow items from operating, investing and financing as needed to complete the final cash flow for Real Estate Funding Solutions for 2012, 2013, and 2014.
The recommended order of entering data into the financial statements template for a mortgage broker business:
We recommend that the best way to use our financial statements template for a mortgage broker business is begin with the modules tab where all the key variables that go into the financial statements for a small business like Real Estate Funding Solutions can be input. Next we recommend that the annual profit and loss statement followed by the monthly profit and loss statement be completed. While we have provided manual input ability in the balance sheet and cash flow statements, it is recommended that this option be used only by folks familiar with accounting concepts. Thus the last pieces of the financial statements puzzle will be the balance sheet and cash flow statement tabs.
Modules - how to get started?:The first order of business for a small business owner like Ryan Armstrong when they get started with the Modules tab of the financial statements template is as follows:- In the Legal Disclaimer & Copyright Information section, make sure you select 'Yes' to indicate your agreement and acceptance of the terms and conditions laid out.- Next you will navigate into the yellow cells that are at the very beginning of the data input area and enter in the name of your company, enter in the first year for which the pro-forma statements are being prepared and enter in the sales forecast for the three years. Remember these sales forecast numbers have to match up with the sales forecast number in Templates 5.7, 5.8 & 5.9 - the sales projection templates.
Modules - Personnel Summary & Compensation Forecast:
The Personnel summary and compensation forecast section of the modules is where a business owner like Ryan Armstrong get the opportunity to project the total compensation that a small business like Real Estate Funding Solutions is anticipating paying out for 2012, 2013, and 2014. This section is divided into two sections - one for projecting management compensation and the other for staff. The management section is where the compensation for owners, partners and directors should be included and of course all other compensation information for the staff will have to be entered into the staff compensation section.
We recommend that all small businesses like Real Estate Funding Solutions in the mortgage broker business, break down the compensation categories into Operations staff, Production staff, Administrative staff, Sales & marketing staff. We have also provided room for three other categories of staff and thus you have the ability to input a total of four management names and seven staff names / categories. Remember what you input as names or categories is what will show up in the final output that you will be pasting into your actual business plan. Just like the owners of Real Estate Funding Solutions you have the ability to choose the compensation to be a percent of sales with a certain increase in the rate of annual compensation to account for inflation, or simply manually input the number for each name / category for each year being projected.
Finally if you don't want to use our Personnel summary and compensation forecast, you don't have to. Instead you may just want to include a manually calculated cost for your personnel compensation for each of the three years in the business plan that you are looking to forecast. The last section of the personnel summary and compensation forecast module allows you enter that number. The final total compensation is of course what will be used by the formulae in the creation of the pro-forma financial statements as we did in the case of Real Estate Funding Solutions for 2012, 2013 and 2014.
Modules - Capital Structure Summary:
The capital structure summary module is where a small business owner like Ryan Armstrong of Real Estate Funding Solutions is asked to input the total contributions made by all partners and owners of the mortgage broker business. The inputs as always have to be made in the yellow colored cells for all the three years of the business plan as appropriate. We have not included any room for distributions since most lenders and business partners do not like to see distributions of capital. The rationale for this is very simple, if a small business owner like Ryan Armstrong is about to take on a business loan for Real Estate Funding Solutions and also shows that the intention is to later take a personal capital distribution, the bank or partner may view the business loan or potential investment as a source for the distribution.
If you intend to take distributions for your mortgage broker business we recommend that you include the capital number in this module to be net of contributions. Thus if you were looking to contribute $100,000 and then take a distribution of $50,000, you may be better off simply showing a contribution of $50,000. As always please make sure that this number is the same as the number in Template 2.5 - source of funds covered earlier in the business plan.
Modules - Loan & Interest Expense Summary:
The Loan and interest expense summary section is where a small business owner like Ryan Armstrong is able to input the total amount of loans and lines of credit a small business like Real Estate Funding Solutions will be expecting to take out in the 3 years of the business plan. In order to complete this section, all that the business owner has to do is to fill in the yellow colored cells for each of the fully amortizing loans and lines of credit. There are two input sections for fully amortizing loans where a small business owner like Ryan Armstrong would have to pay both principal and interest and there are also two input sections for interest only lines of credit where only the payment of interest would be due.
Finally at the very end of the Loan and interest expense summary section there is a manual input section that gives a small business owner like Ryan Armstrong the ability to simply manually enter in the total monthly loan payments, annual loan payments, annual interest paid, annual principal paid and principal balance at the end of the year along with the total loans taken out in year 1. The template is designed to automatically take in the final manual input instead of the automatically calculated numbers if that is what you so desire.
Please take care to make sure that the numbers that are inputted here in this module correspond to the information in Template 2.6 - the Loan Summary section covered earlier in the business plan.
Modules - Fixed Asset & Depreciation Summary:
The fixed asset and depreciation summary module is where a mortgage broker business owner is able to input the total fixed assets that they will be purchasing in the three years that are being projected in the business plan along with the depreciation that these assets will undergo during that period. Fixed assets are typically those assets that will be used by a small business like Real Estate Funding Solutions for a long period of time and cannot be easily converted to cash.
Each fixed asset that is purchased by the business in turn naturally depreciates every year, since it is no longer as valuable as it was when it was new. Businesses are allowed to write off this depreciation as a part of their operating expenses. What varies of course is the amount of depreciation of different fixed assets. To keep things very simple it is commonly recommended that all items like computers and office equipment be depreciated over 5 years at 20% a year; machinery is depreciated over 7 years at 14.28% a year; Leasehold improvement depreciate over 10 years at 10% per year; residential buildings depreciate over 27.5 years at 3.63% per year and commercial buildings depreciate over 40 years at 2.5 percent per year.
The calculation for all depreciation in our pro-forma financials is based on a straight line depreciation where a constant amount is depreciated every year. Our template requires a small business owner like Ryan Armstrong to enter the purchase price of the fixed asset and the rate of depreciation per year - our templates do the rest.
Modules - Purchases, Inventory & Cost of Goods Sold Summary:
The purchases, inventory and cost of goods sold summary give a small business owner like Ryan Armstrong the ability to input the Purchases of all material that a small business like Real Estate Funding Solutions has to undertake in order to get its final product or service ready for sale. Typically if you are a restaurant, the cost of all the food items that you have to buy before you turn them into the food you serve is what you would list here; if you were a small manufacturing firm, then all the raw material that you purchased along with the cost of acquiring these materials manufacturing firm, then all the raw material that you purchased along with the cost of acquiring these materials would be included in the Purchases section. In the service business like that of a lawyer, realtor, broker, there are very few items that can qualify as a purchase.
Inventory is also included in this module. A small business owner like Ryan Armstrong of Real Estate Funding Solutions will have to add in the initial purchase of inventory if there was one and also the closing inventory for each of the three years being projected if applicable.
Modules - Accounts Receivable Summary:
The Accounts receivable module requires a small business owner like Ryan Armstrong to input the percent of accounts that will be receivable for each of the three years in the business plan. AR can be entered as a flat pecent of sales which is the norm or one can manually enter in the exact dollar amount of sales that is projected to be receivable for each year.
Modules - Accounts Payable Summary:
Much like the AR summary section of the module, the Accounts Payable (AP) section gives a small business owner the ability to estimate how much of the purchases they make a year will be payable every year - meaning they will not have paid for by the business at the end of each year. Here again, one can choose between Accounts payable as a percent of the total purchases made or one can enter in a manual number.
Modules - Security Deposit:
The last section of the modules that has to be filled in by a small business owner like Ryan Armstrong is the one dealing with the security deposit that has to be paid by a small business like Real Estate Funding Solutions when it rents a location at Rochester, New York.
What goes into the Annual Profit and Loss statement for an mortgage broker business?
The annual profit and loss statement for a small business like Real Estate Funding Solutions is where a small business owner like Ryan Armstrong has to project what the operations of the business will look like financially over the coming three years being projected in the plan. This is the most important aspect of the financial statement section since this is what lenders and potential partners look towards when trying to get a sense about the viability of a small business like Real Estate Funding Solutions
Any profit and loss statement is essentially a movie of the entire years operations of the business, and the profit and loss section of our template give a small business owner like Ryan Armstrong the ability to tell their projected financial story with a few inputs and selections.
In order to get started you have to enter in the employer tax rate ( including all deductions for employer taxes like FUTA, SUTA, Medicare etc. ). To be on the safe side we recommend that business owners like Ryan Armstrong input a minimum of 7.5% for the employment tax rate. Also required is the combined State and Federal tax rate for the business. This rate is requested so that a reasonable provision for taxes can be made in the projected pro-forma business plan financials.
As you will when you open up our template, you can only enter data in the cells highlighted in yellow and after entering in the basic information on employer taxes and the combined income tax rate, you will have the opportunty to enter in the operating expenses. A small business owner like Ryan Armstrong has the ability to enter in the description of the operating expense and the corresponding amount for each of the three years being forecasted. Further, each line of operating expense can be entered into as either a percentage of sales with an annual percentage increase to account for inflation, or simply a manual number. In the event a manual number is inputted by a small business owner the template will use that number instead of the percentage of sales number in the final profit and loss statement.
At the end of the operating expenses section we have included the line items of depreciation, gross wages and others that are calculated automatically just like the total sales and cost of goods sold numbers at the very top of the profit and loss statement. The image preview area gives a small business owner like Ryan Armstrong a clear idea of what the final profit and loss statement will look like in the output tab.
How does the monthly profit and loss statement work for a mortgage broker business?
Many lenders and potential partners like to see the annual profit and loss statement with more granularity for the first year for which projections are being made. The reason for this is that the first year usually tends to be the toughest year for any new venture or even for an existing business that is looking to expand further. What lenders and potential partners want to see is precisely how the business will perform in the coming year and if there is any seasonality to the profitibility of the enterprise over the entire year.
While the inclusion of the monthly profit and loss statement in a business plan for a mortgage broker business is purely optional, we recommend that it may well be worth the time for a small business owner like Ryan Armstrong to go ahead an create one using our free template especially when it is so easy to do so.
There are only two key pieces of input that go into this template and as always all the cells that require input are highlighted in yellow. The first input required is the monthly sales allocation which lets a small business owner like Ryan Armstrong allocate the total annual percent of the sales into twelve different monthly buckets that all together total up to 100%.
The second item that needs to inputted is the expense allocation using the drop down menu provided next to each of the operating expenses to allocate them into either a percent of monthly sales, fixed each month, quarterly, semi-annually or annually. What we are trying to accomplish here of course is that each operating expense has its own dynamic. Thus while an operating expense like advertising may fluctuate each month as a percent of sales, rent will remain the same for each month. Further there will be some costs that will only be bourne by the business one a quarter or once every six months or once a year.
After these two sets of selections are made, the monthly profit and loss expense report is ready to go! All you have to do is to copy and paste it from the output tab.
Balance Sheet for a mortgage broker business:
The balance sheet is the snapshot of the financial health of a business and every small business like Real Estate Funding Solutions has to have a pro-forma balance sheet for each of the three years that are being projected in the financials. Our templates have been structured to automatically create the balance sheet for a small business like Real Estate Funding Solutions based on the information entered into the modules, annual and monthly profit and loss accounts. Thus a small business owner like Ryan Armstrong does not have to do much else but copy and paste the final balance sheet from the output tab.
On the rare instance that there is the need to add a manual entry or change any of the automatically calculated numbers manually, we have provided users with the facility to do just that. Please ensure that your assets equal your liabilities for each of the three years for which projections are being made. Thus as in the case of Real Estate Funding Solutions the total assets for 2012, 2013 and 2014 are $48,913, $70,182 and $80,377 and you will have to make sure that the total liabilities will be the same.
Cash Flow statement for a mortgage broker business:
Again just as in the case of the balance sheet, a small business owner like Ryan Armstrong does not have to do anything but simply cut and paste from the output tab, the automatically created cash flow statement. However, in the rare event that a manual entry needs to be made to add a new operating, investing or financing activity that was not covered or change any of the automatically calculated numbers, we have provided small business owners like Ryan Armstrong the ability to do just that. Please make sure that the total closing cash numbers for 2012, 2013 and 2014 are $12,196, $36,947 $50,624 the same as the number for cash under current assets in the balance sheet.
The output tab has been created so that a small business owner like Ryan Armstrong has the ability to view the combined output of the entire financial statements template on one tab and copy and paste them as necessary into the business plan. Good luck with your plan.
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