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I'll Just Get a Loan (It's not that simple)
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 ***Tampa***

 Lunch & Learn

May 3, 2016 - Noon

Join our Keith Blackman and GrowFL in Tampa at the Corporate Center III at International Plaza, Room CC1 at 4221 W. Boy Scout Blv/d. Ste. 100, Tampa as he presents a lunch and learn event - "The Importance of Cash Flow Management for Enterprise Growth", designed for CEOs, Presidents and owners of second-stage growth companies.

 For more details and to register,  click here


_________________


***South Florida***

Vitalize Florida: A CEO Summit for Second-Stage Entrepreneurs

May 20, 2016

7:30 am - 6:00 pm

Nperspective CFO & Strategic Services is proud to encourage your attendance at the CEO Summit being sponsored by GrowFL and Innovation Hub at Broward College. The best and the brightest CEOs from around the State are convening for this special event.

This CEO Summit is being held at Broward College South Campus, 7200 Pines Boulevard, Pembroke Pines, FL 33024. It will feature industry leaders from the finance, legal, human resource, and multiple other disciplines. The cost for this full day event is $79, which includes Breakfast, Lunch and Closing Reception.

To view the agenda and register,  click here




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April 2016

I'LL JUST GET A LOAN

(It's not that simple)

Sergei Galeano, CPA* - Principal

 
   
You have decided that your business needs a loan. You are not quite sure what specifically it is for, but cash is tight, receivables are slow or you want to buy some equipment or run a marketing campaign sometime in the future and you know you will need cash. You estimate $500,000. You would be glad if you can just get the loan and aren't too worried about the details. So you are ready to call a couple of bankers you know and see what they can do for you.
 
Now is when you need to step back for a moment and do some analysis. There are two areas of concern that come to mind at this stage:
  1. Understanding why you need the loan, how much and for how long, and,
  2. Preparing to present yourself to prospective lenders.
Why Do I Need a Loan?
It is important to understand why you need a loan or, more importantly, if you actually need one at all. It is possible that an equity investment for a more permanent infusion of cash would be more appropriate. You won't be able to answer this question until you write down your goals and plans for the future, particularly the next two to three years. In what direction do you see your business going? Are you planning any major investments, business expansions (new product lines or move into new geographic areas), hiring, etc.? Can you identify anything else requiring cash out of the normal course of business? Write it down along with general estimates of these costs. This in itself may require much more analysis and research. The point is the potential lender will want to know why you want a loan. You should understand that issue clearly.

Next you will need properly prepared forecasts that include the possibility of those potential cash requirements for the next two to three years or longer, depending on the nature of your business. Typically these are prepared on a monthly basis so that seasonal financing requirements are properly identified. Many companies create several forecasts that quantify the best case, the worst case and the most likely case. The forecasts should include your income statement, balance sheet and statement of cash flows. These forecasts will give you your first glimpse into the amount and timing of your financing requirements. They will also help you measure your company's ability to repay the loan(s). These factors will determine the structure of the loan. Working capital needs (short-term) and capital investment needs (long-term) are two entirely different requirements and you should understand the difference.

There are many examples of businesses entering into long-term loans when there was only a short-term need and vice versa. The closing costs for a loan can be very expensive, so planning and understanding your needs can help you minimize the amount of these costs over time.

In addition, the information in these forecasts will play a crucial role in structuring the loan covenants. I can't tell you how often loans are secured only to run into default status months later because little thought was given to what appear to be "standard" covenants. While you cannot rely on your banker to properly set covenants, rest assured that the banker does not want you to violate them any more than you do. No one looks good when a borrower violates covenants early in the life of a loan. That's a clear indication that the loan was not structured properly, and when this happens, there is plenty of blame to go around, and no one wins.

Making Your Pitch
Do you know how many bankers have told me that they have turned away business because the inquiring company just didn't have any good information to present? Many. You may have the greatest business in the world, but if you can't communicate that to the potential lending party, it serves no purpose when attempting to secure a loan.   Here are a few of the key things lenders are looking for:

Credit History: This will likely be both personal and business. Check these out through Dun & Bradstreet and/or the free credit score sites. Try to repair any material errors or issues that negatively impact your credit.

Properly Prepared Financial Statements: You will need to submit your last two or three years' financial statements. You want these to be as clean and consistent as possible, as they will set the tone for the negotiations. Audited financial statements are best, but at a minimum, you want to be sure they are compliant with Generally Accepted Accounting Principles and presented consistently throughout the years covered. Also, you want to make sure that you do not have personal expenses flowing through your income statement. Finally, you need to be able to clearly explain any unusual items or variances.

Financial Projections: It is best to be able to present an Income Statement, a Balance Sheet and a Statement of Cash Flow forecasts for each of the next three to five years. The first year should be presented on a monthly basis, while quarterly statements beginning in year two are generally sufficient. These must be supported with reasonable assumptions. Obviously the size of your potential financing relative to the size of your company will influence the amount of detail required.

Business Plan: A business plan is often necessary when the financing needs are substantial. This may be in detail or summarized depending on the lender's request. This topic could be a whole other article, but generally the plan will include:
  • An Executive Summary - A brief outline of your company's organization, its plans and goals, your strategy and how it supports your overall mission. It is essentially a resum� of your business.
  • Description of Your Business - Brief history, the goods/services that you provide and anything that is unique to your business.
  • Market Analysis - Identify your competition and your market opportunities.
  • Sales and Marketing Strategies - How you go to market and remain competitive.
  • Financial Information - historical and projected, as noted above.
Start with the basics in each category, and then determine how elaborate each needs to be.

Collateral: Consider carefully what collateral you have and are willing to offer to support the loan, as this question will be asked.

Tax Returns: Business tax returns are definitely required, while personal tax returns are often requested. It is customary to provide the most recent three years' tax returns.

Contracts and Documents: Business licenses, significant business contracts, Articles of Incorporation, corporate resolutions delegating authority, etc. are often needed as part of the application process.

All of these things are essential in making an effective presentation to a potential lender. The important thing is to be prepared and understand your needs and the information you are presenting.

Nperspective can help you evaluate your need for financing and facilitate the process of preparing for and obtaining that financing. Our CFOs have decades of experience helping companies budget, plan, forecast future results and manage cash, enabling them to properly finance their operations.

If your company or one of your clients may benefit by our experience and knowledge, or for a complimentary consultation please contact either  Geoffrey Gallo at 855.696.7236 or [email protected], Gary Colbert at 941.323.9555 or [email protected], or Russell Slappey, 407.448.1781  or [email protected].

 *Sergei is a licensed Certified Public Accountant (CPA) in the State of Ohio.



About Nperspective
Nperspective provides interim, part-time, and project CFO and Strategic Services using a flexible engagement model that is dependent on our clients' unique business needs.  Our partners are seasoned CFOs who focus on rolling up their sleeves, are accommodating to client needs and helping create significant value from within their finance organizations. 
 
Contact us at [email protected] for more information.