32. How will Capital be Used?By Roger Bryan
The usage of the capital in your business plan plays a crucial role in determining the efficacy of your plan. How you are going to use the capital that investors are going to invest with you is crucial for securing the confidence of the investors.
There are various sections under which you can plan your capital usage. These are
1) Working Capital Cycle – This includes the details about the influx of capital in between the various arms of your business plan. Supplier credit rate, cost of production, overheads and finally sales, form the various parts of working capital cycle. You should include details about the fund allocation and management during the working of your business plan.
2) Inventory Management – There are sections in your own business such as the inventory which need regular maintenance and incur costs on yearly basis. Include the details about inventory management costs involved in your business plan.
3) Rents/Recurring deposits – If the business plan works on rented premises or utilizes certain components which have recurring capital inflow, then make a list of these in your business plan.
4) Supplier – How much advance does the supplier need, if at it does? How much credit do you need to maintain the supplier base? You should address these questions with regards to your suppliers under this section