Written by: Alex Bulmer
#1 Most Important Secret
Your Financial statements are up to date, accurate, complete, and presentable. This includes an Income Statement (Year-to-Date to most recent month end) and a Balance Sheet as of the same date. Spend the time and make sure they are correct. Otherwise, this will reduce your credibility and at a minimum significantly delay your funding.
The Other 3 Secrets
Make sure you present a very well thought out Use of Funds Statement. This will show what capital you need, how long you need it, any collateral/security, and amortization sought. On real estate you can hope for, at best 60% loan to appraised value (LTV), and on equipment, you can likely get a higher LTV rate with a capital lease.
You will also need to demonstrate that your business revenue is more than enough to cover the new monthly debt payment (best to have to 1 or more). Having a decent, credible, 3-year projected financial model will greatly help you in closing a deal where your current financials are not quite up to par.
Have your personal financial statements ready as well, including 3 years of prior tax returns. The lender will very likely require a personal guaranty. If you follow the above steps, you will significantly increase your odds of raising capital, debt or equity, and in a timely manner. Having a CFO Accountant on your team is a huge plus as well that can coordinate getting all these to the lender.
About the author:
Alex has over 23 years in the restaurant industry and 7 years’ experience in the bookkeeping & accounting industry. He’s also a QuickBooks Pro Advisor.
As a restaurant owner for over 16 years, Alex knows how daunting accounting can be for the small business owner, but he also knows the importance of understanding the numbers to run the operations of a business efficiently. Either you are too busy running the operations of your business, or perhaps there is a simple lack of knowing what all is involved when it comes to payroll, or perhaps it is a severe case of paralysis of analysis. In either case, it is his aim to be that trusted partner and consultant (CFO if you will) to aid in the financial, payroll and human resources part of the business so you can focus on why you got into business for yourself in the first place – enjoyment.
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