Seeking finance – how to put your best foot forward

By Demetria Kanagasabai

25 October 2019

As traditional banks tighten their lending appetites, a new wave of lenders have emerged to plug the gap. While these alternate financiers appear to be more welcoming of new to bank customers, they are known for their rigorous review and vetting process. So, as a business owner or manager, how do you put your best foot forward when applying for new finance?

The key focus of both traditional banks and alternate financiers will be confirming that both you and your business are a sound investment. To assess this, they will require a business plan and an overview of management’s capability and track record of successfully executing similar plans.

PKF specialise in helping businesses position themselves for growth. They work with management to build a solid foundation for growth by focusing on:

  • The detail behind the growth strategy;
  • The value proposition for the target market; and most importantly
  • Financial projections.

Financial projections, in particular a cash flow forecast, are tools which will allow businesses to articulate their strategy and growth trajectory. It also provides a financier with a basis for estimating the future value of a business. PKF’s key focus areas in preparing financial projections are:

1. Historical position

It is difficult to know where you are going if you don’t know where you’ve come from. Financiers will want to understand the peaks and troughs in a business in the last three – five years of trading. Therefore, we focus on articulating your past performance with transparency including a normalised position with support for all trends and assumptions.

2. Forecast position

A financier will want to know that your forecast is realistic, complete and most importantly achievable. Therefore, we help you build a forecast in which all trends are supported either through historical data or market research. This forecast will communicate your understanding of the target market, impact of seasonality and operational levers on the business.

3. Working capital

An optimised working capital cycle will ensure that cash is not tied up in your business unnecessarily. That is, inventory, collections and payable practices are managed efficiently to ensure the cash collection cycle is as short as it can be. This will require an operational component to ensure the team are utilising working capital levers. We can help you understand your working capital cycle and put an implementation plan in place to make sure your working capital cycle is as optimised as it can be in your business plan.

By being proactive in providing more sophisticated financial projections to your potential financiers there is a greater probability that you will obtain the finance that you need, and you could even negotiate more favourable rates and covenants. Better quality forecasting will also assist your financier in maintaining an ongoing understanding and transparent overview of the business, which will also help with ongoing trust and credibility. 

Please contact your local PKF firm to discuss with their specialists how they can help your business position itself for growth.