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Your business is off the ground, appears to be flourishing, but cash flows are somewhat distressed. You see an advertisement for “Get a business loan here in 3 easy steps with pay out in 24 hours” and so you apply. It’s easy, right? Sure it is, provided you are able to supply a potential funder with all the information that they require. And of course, they will request financial information including current management accounts and cash flow projections. It’s the request that you dread, right?
Why do you need to be able to provide financial information?
Any funder or investor wants to know that your business is a “safe” haven for their funds. They want to know that your business will be capable of servicing debt (in the case of a business loan) or offer healthy returns (in the case of an investment into your business). Whilst a great business idea, a healthy order book, unique methodologies and much more are merely some of your “selling points” to a lender or investor, one of the key pieces of information that you will need to provide will be financial information evidencing performance of the business.
In more recent weeks, with the COVID-19 pandemic affecting many South African businesses, business owners were able to access various fiscal initiatives to support their businesses impacted by the lockdown. One of the key pieces of information required in support of such funding, without exception, has been up to date financial information and projections.
How to be prepared when you apply for funding for your business.
Because the tax benefits of trusts have eroded over time, their popularity has been in decline, but trusts serve a multitude of purposes, including:
- Before you apply for funding or for investment, invest time in a quality set of management accounts, which includes a profit and cashflow projection.
- Ensure that your projections address the next 12 months at a minimum.
- If your business is affected by seasonality, ensure that seasonal shifts are evident in your projections.
- Detail all assumptions applied in the determination of your projections.
- Ensure that your financial information is independently prepared, as this will serve as 3rd party evidence in support of your application.
As one of the many services offered by the MMS Group, financial statement, management accounts and cash flow preparation are all areas that we specialize in. We have the commercial understanding to test the soundness of your assumptions and projections to assist in compiling financial information that will effectively and professionally support your funding or investment application. If your business requires funding or would like to be considered for investment, we would like to assist you. For more information on how to reach us, go to our Contact page.