A projected balance sheet is one of the most important financial statements that you will require when seeking a business loan or constructing a good business plan. It provides the anticipated assets, liabilities, and equity of your firm- which will give the lenders a clear picture of your future financial status.

As a matter of fact, a Reserve Bank of India (RBI) noted that more than 70% of loan rejections among SMEs occur when the loan applicants do not provide complete or unclear financial projections. Therefore, when you are preparing a projected balance sheet for bank loan or when you are preparing realistic projections in bank loan approval then this document is very important.

This blog will demonstrate the creation of a good quality projected balance sheet in stages.

What is Projected Balance Sheet?

A projected balance sheet is a financial statement that indicates how your business will be financially in the future. It is just a picture of where your business is going–not where it is at present. This is a sheet that contains your estimated assets, liabilities, and equity at a given future point in time, which is normally done when one is applying to a loan facility, investment plan or when forecasting a business venture.

In case you are seeking a bank loan, an adequately prepared projected balance sheet for bank loan will enable the lender to determine how stable your business is likely to be. It is one of the most significant sections of your projections to be approved by the bank to give you a loan.

Important Facts Regarding Projected Balance Sheet:

  • Why It Matters: It provides banks and investors with confidence in your business to repay the loan and develop sustainably.
  • What It Contains: Future values of your total assets (cash, inventory, equipment), liabilities (loans, payables) and owner equity.
  • When It Is Applied: It is mainly used in the application of loans, in pitching to investors, or in the establishment of long-term goals in the business.
  • The way to make it: You can create a projected balance sheet online using tools like Finline or with accounting software. This saves time and guarantees bank ready formats.
  • Standard Format: The standard projected balance sheet format usually has assets (current and non-current), liabilities (short-term and long-term) and equity (owner capital and retained earnings).
  • Projected Balance Sheet Formula: To put it simply, the projected balance sheet follows the formula Assets = Liabilities + Owner’s Equity, ensuring the statement stays balanced even in future forecasts.

To put it simply, when you are preparing financial documents to a bank or an investor, a projected balance sheet is not only useful, it is mandatory. So what is the good news? You do not necessarily have to be a financial expert. Projected balance sheet online can be easily generated with the help of platforms as Finline that will help you create reports that banks will accept.

How to Create a Projected Balance Sheet for Bank Loans

A projected balance sheet also known as a pro forma balance sheet, shows the estimation of the total assets and total liabilities of any business. A pro forma balance sheet is a tabulation of future projections. As a result, it will help your business manage your assets now for better results in the future.

The asset will contain long-term assets (non-current assets ) and current assets. The long-term assets will include the building, land, machinery, and vehicles. Whereas the current asset includes the cash in hand/bank, receivables, and socks for the short term.

On the liability side, we have non-current liabilities and current liabilities. In the non-current liabilities, it includes the term loan and current liabilities include the account payable and short-term loan such as a working capital loan.

You may need to prepare a projected balance sheet if you have applied for a business loan for your new project or if you are interested in buying new fixed assets. By showing a well-crafted projected balance sheet from Finline, the bank will get the confidence that the business unit is viable to invest/provide the loan.

The following steps will help prepare the projected balance sheet:

Step 1: Calculate cash in hand and cash at the bank

If you have no booking record of your cash, you can show cash in hand after checking your cash balance in the business’s pocket. You can check also the available balance at the bank. Both will be your current assets on the balance sheet.

Step 2: Calculate Fixed Assets

See everything around you. Make a list of assets whose benefits are you taking more than one year. Check its price from cash memos or past bills. Try to calculate the time of its use. If you have used it for 3 years. Its value will surely decrease due to depreciation. Charge 10% to 20% per year on every fixed asset up to the used period with any method of depreciation. Now, the system will provide you with the current cost of the fixed asset. Show it on the asset side of the balance sheet.

Step 3: Calculate the Value of Financial Instruments

If you invested your money in shares, bonds, and other financial instruments. Write its purchase price. If it has decreased, then you can also show the current market price of financial instruments.

Step 4: Calculate your Business Earning

If you have not made a profit and loss account. You can compare your expenses and your income. If your income is more than your expenses, it will be your net profit. That will be transferred to the liability side of the balance sheet. You should only deduct expenses whose benefits, you have obtained in one year.

Step 5: Calculate Business’s Liabilities

In these liabilities, you can add bank loans, secured loans, and other loans. That will be added to the liability side of the projected balance sheet.

Step 6: Calculate Business’s Capital

Business’s capital, you can calculate by subtracting outside liabilities from total assets. That will also add to the balance sheet on the liabilities side.

How Finline Can Assist You To Prepare a Projected Balance Sheet?

A projected balance sheet is not only a financial statement but it is also a statement of your business vision, planning and credibility. No matter what you use it for, whether it be a bank loan, investments, or just having extra plans, a clear projection is good to keep you financially sound and prepared to grow.

In case you have no idea where to begin, Finline is here. It is an online platform that is simple to use and allows you to create bank-ready projected balance sheets within minutes. No complex formulas or templates, just plain smart tools that entrepreneurs like you can use. Use Finline and invest in your financial future. Create your projected balance sheet now!

Projected Balance Sheet FAQs

A projected balance sheet of a bank loan demonstrates what your business is likely to look like in terms of finances in the future. It also contains approximated values of assets, liabilities and equity, and this will enable the banks to evaluate your capacity to repay the loan. It is an essential component of the loan application procedure of startups and MSMEs.

To prepare one, begin with projecting your assets (cash, inventory, equipment), liabilities (loans, payables) and the owner’s equity. Make projections of your financial situation using your business plan. Make sure that your sheet balances using the following formula: Assets = Liabilities + Equity. Platforms such as Finline can also be used to create it within a short period.

A projected balance sheet form usually consists of:

  • Current assets and non-current assets
  • Short and long-term debts
  • Capital of owner and retained earnings
  • Total assets + Total liabilities + equity

 It is typically designed in a two column format and may be developed in excel, word or specific programs.

  • Provisional: On the basis of actual and unaudited figures of a recent period.
  • Estimated: An approximate financial overview in a situation where no actual information is present.
  • Projected: Future oriented, assumptions and forecasts.

They are used in different ways but the projected balance sheets are important in business planning and loan applications.

First, make your rows of assets, liabilities and equity. Sum up each section using formulas. Everything must add up to Assets = Liabilities + Equity. Excel templates are available or you may download one of the structured formats available at Finline, which are ready to be sent to the banks.

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