Financing plan: match every euro of your startup costs to a source

Once you know what the start will cost, the next question is who pays for it. A financing plan answers that question line by line: how much comes from your own savings, how much you borrow, from whom, for how long and at what cost. A lender reads it next to your startup costs and checks two things straight away. Do the totals match? And does each type of money fit what it pays for?

This guide continues the worked example of Chainline Bike Workshop from the page on startup costs. Amounts are in euros; the reasoning applies in any currency.

A financing plan has two columns that must be equal

On the left stand the uses: the assets, stock, deposits, start-up expenses and cash buffer from your investment budget. On the right stand the sources: own money, loans, supplier credit, leases, grants or investors. The totals must be equal. If the sources fall short, part of the plan is unfunded. If they are higher, you pay interest on money you do not need.

Equal totals are not enough. Match the term of each source to the life of what it pays for:

• Long-lived assets: fit-out, machinery and vehicles belong with long-term money, such as a term loan or your own savings.
• Stock and VAT: these turn over within months and can be funded with shorter money, such as supplier credit or an overdraft.
• The cash buffer: fund it with own money or a long-term loan, never with credit that has to be repaid when you need the buffer most.

Owner's contribution: how much and what counts

Your own contribution is the money you put in at your own risk: savings, or assets you bring into the business at a realistic value, such as a van or tools you already own. Lenders see it as proof that you share the risk. Canada's state-owned development bank BDC puts it plainly: bankers want to see you put your own money into the business (source: BDC, June 2023), and a financial institution will expect you to invest some of your money or provide collateral (source: BDC, August 2026).

No single percentage applies across lenders and countries. What a lender asks for depends on the sector, the collateral, your experience and the programme. Some programmes ask for no own money or security at all: the UK Start Up Loans programme is unsecured and needs no assets or guarantors (source: British Business Bank, October 2026). Ask early what your lender expects, and treat a family loan as own money only if the lender confirms it does so and the terms are written down.

Financing sources side by side

Starter loan programmes give an idea of terms. SBA microloans in the US go up to $50,000, average about $13,000, run for at most seven years and generally carry rates between 8% and 13% (source: US Small Business Administration, August 2026). UK Start Up Loans range from £500 to £25,000 at a fixed 6% a year over one to five years, with twelve months of free mentoring (source: British Business Bank, October 2026). Canada's Small Business Financing Program helps small businesses borrow from financial institutions by sharing the risk with lenders (source: ISED Canada, June 2026). The guides on funding and grants and startup capital go further into each source.

What a bank or microlender wants to see

• The required documents: Start Up Loans asks for a business plan, a cash flow forecast for 12 months and a personal survival budget, all in English (source: British Business Bank, October 2026).
• Capacity to repay: a cash flow forecast that includes repayments, interest, VAT and your drawings, and still stays above zero.
• Experience: BDC says the first thing it looks at is your experience and how prepared you are (source: BDC, July 2025).
• Credit record and guarantee: for start-ups, BDC says banks typically require a personal guarantee and rely heavily on your personal credit score (source: BDC, July 2025).
• A plan B: what you do if revenue lags, before the lender has to ask.

Worked example: Leo's financing plan

Fictitious Firmfocus example. Interest rates are assumptions for the example. Both loans are repaid in equal annual amounts; interest is calculated on the average balance per year and rounded to hundreds.

The two loans of €55,000 cover the €45,000 of fixed assets and €10,000 of stock. Leo's €20,000 covers the deposit, start-up costs, buffer and €5,000 of stock. The supplier lets him pay the last €5,000 of starting stock in month four, from sales. Leo's own share is 25%. That is a solid signal of commitment, but his lender also asks for a personal guarantee on the bank loan.

What the repayments do to his cash flow

Repayments are not a cost, so they do not appear in the profit and loss forecast. They do leave the bank account. The bank loan costs €7,000 a year in repayments and the microloan €4,000, so €11,000 a year. Interest of €4,000 in year one is already in the profit figure. Repayments and interest together come to about €1,250 a month in year one. Depreciation is a cost but not a payment, so it is added back:

Fictitious Firmfocus example, simplified: stock, unpaid invoices and VAT timing are covered in the cash flow forecast.

Year two is thin. Leo hires a part-time mechanic, and only €900 is left. A seven-year term on the bank loan would cut repayments by €2,000 a year, at the cost of extra interest of €70 in year one, €210 in year two and €350 in year three. Year two would then leave €2,690. Leo asks the bank for both options before he signs.

Small start or larger start

Five mistakes in financing plans

• Short-term money for long-term assets: an overdraft that pays for the fit-out has to be cleared long before the fit-out has earned itself back.
• No buffer: every euro is assigned to a purchase, so the first slow month means an emergency request to the bank.
• A family loan without a contract: unclear terms damage relationships and leave a lender unsure who gets paid first.
• Forgotten repayments: the profit and loss forecast looks healthy, but repayments are missing from the cash flow forecast.
• All eggs in one basket: one lender, one application, no alternative if the answer is no.

Next, check whether the business can carry these repayments month by month in the cash flow forecast, and whether profit covers them in the profit and loss forecast. The overview of business plan financials links all the budgets, and Start a business has every guide for new founders.