The financial section is where business plans are actually assessed. Funders read the narrative to understand the business and read the numbers to decide whether to fund it — and the numbers are where inexperienced plans fall apart, because assumptions are unstated and the arithmetic does not hold.
What a funder is testing is not whether your projections are correct. Nobody expects them to be. It is whether you understand your own business well enough to have built them from something real.
Business Requirements at a Glance
A funding-ready financial section contains the following.
- A monthly cash flow forecast for at least the first twelve to twenty-four months
- A projected income statement for three years
- A projected balance sheet
- Stated assumptions behind every revenue and cost line
- A break-even analysis showing the volume or turnover at which the business covers its costs
- Start-up costs itemised, with quotations supporting them
- Funding requirement stated precisely, with what it will be used for
- The owner’s contribution, stated and evidenced
- Sensitivity analysis showing what happens if revenue is lower or costs higher
- Historical financial statements, where the business is trading
Registration and Legal Requirements
Cash flow is what funders read first, because businesses fail on cash rather than on profit. A monthly cash flow shows when money actually comes in and goes out, and whether the business survives the gap between paying for stock and being paid by customers.
That gap is the single thing most new businesses underestimate. If you sell on thirty-day terms and pay suppliers on delivery, you are financing your customers, and the plan must show how.
Assumptions are what get tested. A revenue line showing steady growth with no stated basis reads as guesswork. A revenue line stating the number of customers, the average transaction value, the frequency and the conversion rate — with a source for each — can be interrogated, which is what a funder wants.
Funders read the assumptions more carefully than the totals, because the totals are only as good as the assumptions. Being wrong but explicit is far better than being vague.
Do not inflate projections. Experienced assessors recognise implausible growth immediately, and it damages credibility across the whole plan. A modest, well-evidenced projection is more fundable than an ambitious unsupported one.
Include your own contribution. Most funders, including development finance institutions, expect the founder to have committed capital, equipment or a demonstrable stake. A plan seeking full funding with nothing from the applicant is weak.
Documents and Ownership Information Required
What supports the financial section and is asked for alongside it.
- Quotations for equipment, vehicles, fit-out and stock
- Lease agreement or quotation for premises
- Salary schedule showing roles, numbers and costs including statutory contributions
- Pricing analysis showing how prices were set and how they compare to competitors
- Evidence of demand — letters of intent, signed orders, pilot sales or market research
- Historical bank statements, for a trading business
- Annual financial statements for the last two years, where they exist
- Management accounts, year to date
- Details of existing loans, leases and other commitments
- Proof of the owner’s contribution
- SARS tax compliance status PIN
Tax, Licence and Compliance Requirements
Get the statutory costs right. Salary costs are not just salaries: UIF, the skills development levy where applicable, Compensation Fund assessments, and any bargaining council or provident fund contributions all apply. Plans that budget for gross salaries alone are understated from the first month.
VAT changes the numbers. If you will cross the registration threshold, model the effect — output VAT on sales, input VAT recoverable on purchases, and the cash flow timing of returns. A plan that ignores VAT and then registers mid-year is wrong from that point.
Income tax and provisional tax must appear in the cash flow. Provisional tax payments are real cash outflows on defined dates, and new businesses frequently omit them and then cannot pay.
Distinguish the funder types, because they assess differently. A bank tests ability to repay and security. A development finance institution tests viability and developmental impact. A grant funder tests alignment with its objectives. An equity investor tests growth and exit. The same numbers should be presented with the emphasis each one reads for.
Free help is available. SEDA, provincial development agencies and municipal local economic development offices assist with business plans and financial projections at no cost, and they know what local funders look for. They are consistently under-used.
Process, Deadlines and Ongoing Obligations
Build the cash flow first, from the bottom up — unit by unit, month by month — rather than starting with a target turnover and working backwards. Plans built backwards from a desired number are recognisable.
Then test it. Ask what happens if sales are half of what you projected, or if payment takes sixty days instead of thirty. A plan that survives that questioning is one you can also run the business on.
- Build a monthly cash flow first — businesses fail on cash, not profit
- State the assumption behind every revenue and cost line
- Support assumptions with evidence: quotes, letters of intent, market data
- Include statutory employment costs, not just gross salaries
- Model VAT if you will cross the registration threshold
- Include provisional tax payments in the cash flow
- Show your own contribution clearly
- Run a sensitivity analysis and include it
- Use free support from SEDA or your provincial agency
Frequently Asked Questions
What do funders read first?
The monthly cash flow. Businesses fail on cash rather than profit, and the cash flow shows whether the business survives the gap between paying costs and being paid.
How detailed must assumptions be?
Detailed enough to be interrogated. Customer numbers, average transaction value, frequency and conversion rate, each with a source, rather than a growth percentage with no basis.
Should I present ambitious projections?
No. Experienced assessors recognise implausible growth immediately and it damages credibility. A modest, well-evidenced projection is more fundable.
Where can I get help?
SEDA, provincial development agencies and municipal local economic development offices assist with business plans and projections free of charge, and they know what local funders look for.
Funder requirements differ by institution and tax thresholds and rates are set by SARS and revised. Confirm current thresholds with SARS and specific requirements with the funder you are approaching.