How to ensure you secure the funding required for your business – top tips when preparing projections

The Government’s CBILS lending support scheme will require applicants to provide a set of at least 12-month projections.  As most will know, projections are usually a standard requirement when applying for a loan during normal times – but, as we also know, these are not normal times.

We thought it would be helpful to pull together a few key reminders of what a good set of projections should look and feel like – and highlight some of the pitfalls to avoid. 

So, what are the key points and characteristics of a compelling set of financial projections?

They are integrated across the profit and loss account, balance sheet and cash flow statement. 

In other words, if one input is changed in relation to, say, sales volumes, the model is set up so that the impact of this automatically flows through to the balance sheet (trade debtors and cash receipts of course, but perhaps also stock ordering and holding levels and thus trade creditors) and the cash flow statement (the cash implications of these changes). 

There are many proprietary software forecasting packages which can be used for many businesses; but if yours is more complex or nuanced then you should consider having a bespoke excel based model created.

Funders expect that, particularly in the case of complex business models, there will be simplifying assumptions. But you must explain these in the assumptions or covering narrative to the projections so that users can understand the impact. 

Your accountant can advise you on what simplifications are appropriate given your specific set of circumstances.

It is not just about the numbers. You will need to include some narrative.

Not ‘War & Peace’ but enough to scene set (particularly if applying to a funder who does not know your business very well) and explain clearly and concisely what the key assumptions are.

The (cash balance) Devil may be in the (hidden) detail. 

Forecasts are usually prepared on a monthly basis, but your business might have significant cash swings within any one month. That doesn’t mean you must do a weekly or, even worse, a daily forecast; but you must have an awareness of what the impact on the cash position is within any given month –  and discuss this with the potential funder. 

If not, you run the very real risk of quickly breaching the covenant requirements which are part and parcel of any funding. You don’t want to do that as it undermines the relationship with the funder and can quickly erode any goodwill.

If you have a seasonal business, ensure that you have modelled as best you can the seasonality profile of your business. 

This is necessary as it will point to those parts of the year when the cash might get a bit tight,  and forewarned is forearmed for any discussions with funders about what both you and they can do to mitigate the impact of these pressure points.

Your business might be about to experience significant growth as result of receiving the funding; but you must be able to rationally explain why this is so. 

Where is your market research and hard data to support your growth projections (particularly if the growth is significantly better than the current run rates)?

Exponential growth may be possible for a while, but there are whole mountain ranges of business plans which forecast hockey stick growth rates which did not come to pass.

Make sure the projections are logical (much easier if you have followed the first point). 

What we mean is, if, say, sales volumes go up then it is logical to expect your trade debtors to increase pro-rata. If they do not, then you need to explain why.  

Make it very clear how you intend to use the funding you are seeking and what the impact of this will be. 

It may seem obvious, but it does no harm to perhaps bring this out in the narrative to the plan.

Linked to the above, be very clear about the medium-term strategic goals for the business. 

How will the funding move your business nearer to where it wants to be in, say, 3 years? 

Strategic goal setting is a whole other topic but try and keep the goal clear, as well as the pathway to achieving it flexible and able to react to changes (which, as we are seeing, can be significant, unpredictable and swift).

We cannot cover everything in here, but these are some of the more common themes we see when clients ask for our help in preparing projections. For further information on how we can assist you in your funding application please see our factsheet here.  Or contact our specialist members of the Corporate Finance Team on