How to prepare cash flow statement for a loan application?

In preparing a cash flow statement for a loan application, the goal is to show lenders what cash comes into the business, what cash goes out of the business, and what the inflows of cash and outflows of cash are for your business. In preparing the cash flow statement, create a cash flow statement and determine a time period. Most lenders will want at least a few months, but ideally it would be some part of a year. Make sure you have all your records and receipts. Then, make a list of all the way cash comes into the business, for instance sales, cash contributions from an investor, and loans you have taken. Now, prepare a list of all ways cash goes out of the business, such as paying suppliers, paying staff wages, paying rent, paying utilities, and loan repayments.

You can categorise the cash inflows and outflows from the business into three categories. Operating activities are all the day-to-day business activities related to sales, paying of the suppliers, paying staff wages, and paying rent.

Investing activities may refer to money spent on or generated from longer-term investments, such as purchasing equipment, property, or technology, or selling company assets.

Financing activities may refer to cash movements related to funding the business—raising capital, taking new loans, repaying existing debt, or paying dividends.

Whether you use a table on a spreadsheet or have your own accounting software, it's important that your cash flow numbers remain neat and accurate. You should always double-check the numbers compared to the bank statements to ensure they corroborate. If you have a reliable, positive cash flow lenders will see that you can manage bills and pay them back. If you have variances either be candid about them, or explain why there was a bad month or a big expense.