Lenders often ask a business owner who is seeking to borrow money to finance their small business to prepare what is called a sources and uses statement. This statement is a simple outline of how much money you need and how you will spend every penny of that money.

The sources part of the statement (which is usually on the top half of the page) lists what sources of funding you are seeking and what sources of funding you may be putting into the business. The money you are putting into the business is called Ownerâs Capital.

The uses section of the statement lists in detail how you will use the money. You may list items such as equipment, advertising, inventory purchases, shipping charges or other items for which you need to borrow money. You should provide as much detail as you can provide and you should contact supplies or vendors to get exact quotes or estimates for what you might be purchasing. If you explain that you are a potential customer, vendors should be willing to give you estimates of costs.

Some businesses add an item to their sources and uses statement called working capital. This is to cover unanticipated expenses or general operating expenses that may arise as they start the business. This number should be smaller than the other numbers and you should have some rationale for the number you select.

Think through carefully what you will need as a loan to operate your business. This is money that you will have to repay with interest so collect solid estimates for each item and try to anticipate what you will need to generate enough sales to cover the business expenses. A cashflow statement is useful preparation for completing this statement.

An example might be: