Financial projections for a bank loan proposal need to be tailored to reflect the type of audience they are aimed at and the type of finance being sort.
Lenders have different requirements from investors, and will look for different information in the figures.
A bank wants to know they will get their money back
When presenting financial projections for a bank loan, the bank manager will want, among other things, to have answers to the following questions.
10 Financial Projections for a Bank Loan Proposal Questions
- How much do you want to borrow?
- What do you want the money for?
- How much have you personally invested in the business?
- When is the money needed and how long for?
- When will you be able to repay the loan?
- Will you be able to pay the interest?
- Can you repay the loan and interest from cash flow?
- Could your business survive a setback in its plans?
- What security, if required, is available for the loan?
- Do you have up-to-date management information, and is it being used?
Ultimately the amount a bank is prepared to loan is based on the credit worthiness of the business and the perceived risk that the business will default on the debt. Business plan financial projections should be built to provide the answers to these questions. A bank financial ratios report is useful to highlight significant information to the lender such as any banking covenants, net asset cover, interest cover, capital repayment cover, gearing.
About the Author
Chartered accountant Michael Brown is the founder and CEO of Plan Projections. He has worked as an accountant and consultant for more than 25 years and has built financial models for all types of industries. He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own. He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a BSc from Loughborough University.