Project 1, Linda, financplan

PBM Zuyd

8 Sept 201414:15

Summary

TLDRThis presentation covers the financing plan for a business, building on a prior session that discussed the investment budget. The speaker explains the difference between equity (owner’s capital) and debt (external loans) and how to balance them. The presentation outlines how businesses should structure their finances, including types of loans like long-term mortgages and short-term credit. It emphasizes the need for the total investment to equal the combined financing sources and concludes by explaining the creation of an opening balance sheet, which aligns assets and financing at the business's start.

Takeaways

💼 The presentation discusses a financial plan for a business, focusing on investment budgeting and financing plans.
🏢 It's essential for businesses to determine the necessary assets and production means to operate effectively.
💹 The financing plan should indicate how the business intends to finance its required assets, such as purchasing a building.
📈 There's a distinction between 'own capital' (equity) and 'external capital' (liabilities), which must balance with the total investments.
💰 'Own capital' refers to the money invested by the business owner into the company, which is permanently at the company's disposal.
🏦 'External capital' includes funds obtained from external sources like banks, which are temporary and must be repaid.
📉 Businesses must present a financing plan to banks to secure loans, indicating their ability to repay the borrowed capital.
💵 Guidelines suggest a minimum of €10,000 and a maximum of €15,000 per owner to be invested in the business.
🏛 Long-term liabilities are debts that take more than a year to repay, such as mortgages for business properties.
📑 Short-term liabilities include creditors and overdraft facilities, which are due within a year.
📊 The financing plan must be balanced with the investment budget, ensuring that the total investments are covered by own and external capital.

Q & A

What is the main focus of the second part of the financial plan presentation?
-The main focus is on the financing plan, explaining how the company intends to finance its investments in assets and production means.
What is the difference between 'eigen vermogen' and 'vreemd vermogen' as mentioned in the script?
-Egen vermogen refers to the owner's equity, the money invested by the business owner into the company. Vreemd vermogen refers to external funds, such as loans from banks or creditors, which are temporary and must be repaid.
What is the minimum amount an owner must invest in their business according to the guidelines mentioned?
-The minimum amount an owner must invest is €10,000, and the maximum is €15,000 per owner.
What is the total minimum investment required if a business has four owners?
-If each owner invests a minimum of €10,000, then the total minimum investment for a business with four owners would be €40,000.
What is a 'hypothecaire lening' and how does it relate to financing a business?
-A 'hypothecaire lening' is a mortgage loan used to finance buildings needed for the business. It typically has a term of 25 to 30 years and uses the building as collateral.
What is the significance of the balance sheet in the context of the financial plan?
-The balance sheet is significant because it shows the company's assets and how they are financed at a specific point in time, ensuring that the total assets equal the total liabilities and owner's equity.
Why is it important for the financing plan to match the investment budget?
-It is important for the financing plan to match the investment budget to ensure that the company has sufficient funds to cover its investments and that the financial plan is feasible.
What is a 'rekening-courant krediet' and how does it work?
-A 'rekening-courant krediet' is an overdraft facility on a current account where the bank allows the account holder to overdraw up to an agreed limit, effectively borrowing money from the bank.
How does the script suggest that a business should approach the creation of its financial plan?
-The script suggests that a business should start with owner's equity and then determine the amount of external financing needed, ensuring that the total investments are covered by the sum of owner's equity and external funds.
What is the purpose of the opening balance sheet mentioned in the script?
-The opening balance sheet is used to show the financial position of the company at the start date, typically January 1st, before operations begin. It includes both assets and liabilities to provide a snapshot of the company's financial health at that moment.
Why is it necessary to ensure that the debit and credit sides of the balance sheet are equal?
-Ensuring that the debit and credit sides of the balance sheet are equal is necessary to maintain the balance of the accounting equation, which states that assets must equal liabilities plus owner's equity, reflecting the financial health of the company.

Outlines

00:00

📊 Overview of Financing Plan Structure

This section introduces the financing plan, which builds upon the investment budget discussed earlier. It explains that the financing plan outlines how assets will be funded, either through the company's own capital or external sources. The distinction between equity (own capital) and debt (borrowed capital) is emphasized. Equity comes from the owner's investment, while debt comes from external lenders like banks. The goal is to match the total investment with both equity and debt, and determine the necessary funding to maintain operations.

05:03

🏦 Understanding Debt: Hypothecary Loans and Creditors

This paragraph explains the two main types of debt: long-term and short-term liabilities. Long-term debt includes loans like mortgages, which are secured by property and have repayment terms of 25-30 years. If the business cannot repay, the bank has the right to sell the property. Short-term liabilities include creditors (unpaid bills for goods received) and credit lines, which allow businesses to temporarily borrow from banks. This section highlights the importance of distinguishing between these types of debt when creating a financing plan.

10:03

📈 Calculating Total Financing Needs

The paragraph walks through an example financing plan. The company needs €321,000 in total investments and has €305,000 already secured through equity and long-term loans. It still needs an additional €16,000, which will be financed through a short-term credit facility. This example demonstrates how a company determines its total financing needs, ensuring that investments are funded by a combination of equity, long-term, and short-term debt.

Mindmap

Keywords

💡Investment Budget

The investment budget is a plan detailing the amount of capital required to acquire assets and production resources necessary for the business to operate. In the video, it is mentioned that the company needs to establish how much it requires in assets to run its operations. The investment budget serves as a foundation for determining how much financing will be needed.

💡Financing Plan

The financing plan outlines how a business intends to fund its investments, showing the sources of capital such as equity or loans. In the video, it is used to discuss how the required investments will be financed, distinguishing between own funds (equity) and external funds (debt). This plan is essential for balancing the investment budget with available financial resources.

💡Equity Capital

Equity capital refers to the amount of money that the business owners invest in the company. It is considered permanent capital that does not need to be repaid. In the script, the speaker explains that equity capital is the amount that the owners contribute, which could range between 10,000 and 15,000 euros per owner, depending on the type of business structure (e.g., sole proprietorship or partnership).

💡Debt Capital

Debt capital is money borrowed from external sources, such as banks, that must be repaid with interest over time. In the video, debt capital is categorized into long-term and short-term debt, with examples such as mortgages and creditor obligations. Debt capital is used to finance investments that cannot be covered by equity capital alone.

💡Long-Term Debt

Long-term debt refers to loans or financial obligations that are due for repayment after more than one year. Examples in the video include mortgages for purchasing buildings and other loans that extend up to 30 years. The video emphasizes that long-term debt is typically used for substantial investments, such as acquiring property.

💡Short-Term Debt

Short-term debt is financial obligations that need to be repaid within one year. In the video, examples include creditor obligations and bank overdrafts. Short-term debt is often used to manage day-to-day operations, such as paying suppliers or covering minor cash flow gaps.

💡Mortgage Loan

A mortgage loan is a type of long-term loan used to finance the purchase of property or buildings, secured by the property itself. The video explains that when a business takes a mortgage loan to buy a building, the bank has the right to sell the building if the loan is not repaid. Mortgage loans are usually structured over a period of 25-30 years.

💡Creditors

Creditors are suppliers or parties to whom the business owes money for goods or services received but not yet paid for. In the video, creditors are mentioned as a form of short-term debt. It highlights that unpaid creditor balances represent a liability that needs to be managed within the financing plan.

💡Opening Balance Sheet

The opening balance sheet is a financial statement that shows the assets and liabilities of a business at the start date, typically before it begins operations. In the video, it is mentioned that the investment budget and the financing plan must be combined into the opening balance sheet, reflecting the initial financial position of the business.

💡Break-Even Analysis

Although not explicitly named in the script, break-even analysis is implied when discussing whether the business can repay its loans through healthy financial activities. This analysis involves estimating at what level of revenue the business will be able to cover its costs, including debt repayments. The video advises businesses to evaluate their ability to meet financial obligations based on projected performance.

Highlights

Introduction to the second part of the financial plan presentation.

Discussion on investment budget and financing plan in the first part of the presentation.

Explanation of the need for assets and production means to operate a business.

Introduction to the concept of financing plan and how to finance the required assets.

Differentiation between 'own capital' and 'foreign capital' for financing.

Description of 'own capital' as the money invested by the business owner.

Explanation of 'foreign capital' as funds obtained from external sources like banks.

Requirement to match the total investments with own capital plus foreign capital.

Guidelines for setting up a financing plan for a business plan presentation.

Minimum and maximum own capital requirements for a sole proprietorship.

Calculation of own capital for businesses with multiple owners.

Explanation of long-term and short-term foreign capital.

Examples of long-term foreign capital such as mortgage loans.

Description of short-term foreign capital like trade creditors and current account credit.

Importance of demonstrating the ability to repay loans in a financing plan.

Instructions for creating a financing plan that aligns with the investment budget.

Example of a financing plan with own capital, mortgage loan, and current account credit.

Calculation of the remaining financing needed after accounting for own and foreign capital.

Explanation of how to present the total financing plan.

Introduction to the concept of balance sheets and their components.

Description of how the balance sheet reflects the financing of assets at a specific point in time.

Emphasis on the balance of the balance sheet, with equal totals on the debit and credit sides.

Application of the balance sheet concept to an example business scenario.

Final advice on creating a successful financing plan and balance sheet for a business.