THE BUSINESS PLAN IS A WORKING DOCUMENT AND SHOULD BE REFERRED TO AND AMENDED AS YOUR BUSINESS CONTINUES TO GROW.
THE PROJECTIONS YOU PRODUCE SHOULD THEREFORE BE ANALYSED WEEKLY AND MONTHLY AND UPDATED.
The above statement is fundamental to the success of your business because it will
immediately highlight cash shortages.
A bank is very interested in the first twelve months of the projections; thereafter the
uncertainty will devalue the worth of the projections. Please, however, provide three
years in total so that you can demonstrate where you think your business will go.
Please provide an overview/commentary regarding the numbers and state how you
plan to monitor the financial success of your business. The lender will expect a
monthly report providing up to date financial information compared with the
Projections made and any comments on significant variances (say >10%)
7. Borrowing Requirement
_ Item 6 will flag up the borrowing requirement if any.
_ It is important here to consider the type of facility required i.e. Overdraft, loan,
equity or asset finance and the term of the requirement.
_ Lenders much prefer structure to any Financial Package they provide. For
example an overdraft is an unstructured product and not liked by banks! A Bank
would prefer to provide a working capital facility by way of Factoring if possible,
this ensures that the Bank’s money is being lent to fund debtors and not stock and
losses. Many businesses have been able to disguise their lack of profitability for
many months due to the overdraft facility being used to its full extent!
_ Banks love security and they want to see a good stake. Call me old fashioned but
Banks would not wish to put more than 50% of the cash required and this would
normally require security.
8. Sensitivity Analysis
_ The “what if factor” e.g. what if sales are 10% lower than forecast.
_ What is the break- even point i.e. what are the minimum sales required to cover
the fixed overheads.
_ What would be the effect if sales were 30% higher than budget.
_ What happens if the cost of supply goes up by 10% etc. etc.
Remember the bank wants to know when it will get its money back and how safe its
9. Other Area to Cover (Operations)
_ Suitability of premises.
_ Organisational structure/ succession/ chain of command.
_ Specific industry risks.
10. Risk Management
_ What steps have you taken to recognise and mitigate risks to your business?
_ What is the risk culture like within your organisation?
_ Who is responsible for Risk Management?
_ What contingency plans are in place?
_ Financial Plans.
_ Historic Financial Information.
_ In the age of IT; any films of examples of the product or the nature of the service
are always welcome.
Try and hold the meeting are your business premises if possible you are more likely to
achieve your manager’s full attention.