An exceptional part-time CFO could be the answer to gaining a business loan or investment for business growth.
Depending upon the type of lender and the type of loan the informational requirement could be quite different. While the world of big corporations has a senior CFO and well-oiled finance and accounting teams to perform this, SME’s and small corporate clients frequently struggle to put together an adequate information pack and at worse will result in the loan being declined even if the underlying business is sound.
However, there is an alternative. An exceptional part-time CFO could be the answer. With experience at the highest levels of the corporate world they have both the knowledge and capability to work with your finance and accounting team to put together the informational requirements a range of finance providers could request.
Each lender if different however, generally speaking the pack of financial information could include:
Strategic or Business Plan
Do you have one? Is it current? Does the business plan appropriately describe the business and where it is heading? Does it include key strategies of the business? Does it include a budget? What are the risks facing the business and how are they being mitigated?
Budgeting and Forecasting
Assuming you have covered off the budget in the business plan, most lenders will ask you for a range of forecasts. Two of the most common ones are cash flow forecasts and its big brother the 3-way forecast (P&L, balance sheet, cash flow forecast). A couple of straight-line extrapolations here will simply not suffice and will typically be seen through by the lender. Keep in mind they look at this every day and their aim is to minimise the risk of loan default. Quite simply, the more you can demonstrate you have a strong financial understanding and management capability, the lower their risk.
Financial Performance
History remains a strong indicator of future performance and it is important to ensure all your financials are up to date and show you in the best light. While you may have been driving growth of your business through the P&L, funders know that the balance sheet is frequently a better gauge of the health of the business. Make sure you have taken the steps to make it look healthy.
Risk and Mitigation Strategies
While you may well have covered this in the business plan, some financial providers may wish for you to demonstrate how the mitigation plans are progressing. Are these covered off at board level and minuted monthly or what was the result?
Once you have your finance information pack you will be able to discuss more precisely the type of loan you really require, have a much better understanding of your business, increased confidence when talking about the finances of your business and in some cases your part-time CFO could actually run a type of tender process to ensure you get the best offer, not just the lender-of-last-resort loan you are offered.
There are further benefits of having an exceptional part-time CFO assist you get a business loan that you would receive purely as a bonus:
You get to look and act like a corporate. You meet the lenders with your part-time CFO sitting next to you providing them confidence you know what you are doing. The CFO can tackle more challenging questions and any additional information requirements can be understood and acted on in a timely manner.
As your start to push forecasting and cash flow forecasting methodologies through your business, your business may well start to perform better.
You may find you don’t need as much capital as you first thought or for a shorter term than you thought.
Whether you need the funds for working capital or for an acquisition strategy, an exceptional part-time CFO will help your business to evolve to the next level.
CFO Evolve provides exceptional part-time CFOs, passionately building great businesses through financial and strategic insights. Contact us if you think that we can assist with your business growth.
Comments