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In this lesson, you’ll learn to total your startup expenses and capital, a crucial step in understanding the financial requirements for launching your business. This process not only reveals the amount of money needed to open your business but also identifies the resources already at your disposal. Such insights are invaluable when determining the amount of funding to seek through business loans. To efficiently total your startup expenses and capital, you’ll employ the SUM function, a standard formula in spreadsheets for calculating data. Functions like SUM are advantageous as they are quicker and more accurate than manual calculations and facilitate the repetition of calculations across different spreadsheet sections. The SUM function specifically adds values within a selected range of cells. Start by using the SUM function to calculate the total investment by selecting the range of cells with investment amounts. Repeat this process for each total row in your spreadsheet, covering every source of capital and startup expenses category. Your spreadsheet will automatically compute these values, providing a clear summary of your available capital versus expenses, enabling you to ascertain whether additional funding is needed or if cost reductions are necessary.
Continuing with the financial planning, you’ll next estimate a reserve for contingencies, which accounts for unexpected expenses that often arise when opening a business. A prudent approach is to set aside a reserve amounting to at least twenty percent of your total startup costs, or enough to cover three to six months of operating expenses. This estimation should be based on your calculated total startup expenses, and the contingency reserve will automatically be incorporated into your total expenses. Additionally, you’ll need to provide information on security and collateral for your loan proposal, which reassures lenders about the guarantees on your loan and what can be offered as collateral, such as real estate, vehicles, or other investments. List the value and a brief description of each item that can be used to secure a loan. Finally, document the business owners and any loan guarantors beyond the owners themselves. Now, it’s your turn to apply these steps: Utilize the SUM formula to calculate the totals for each category, estimate a contingency reserve, complete the Summary Statement, and input information about the business owners, loan guarantors, and collateral.