glasgow for business 07.11.11

Glasgow for Business Week

Sourcing Business Finance

7th November 2011

Simon Murrison

About me!

Qualified as CA in 1997

Joined a 3 partner firm in 1999 & became partner in 2005

Joined a multi-national firm in 2009 as partner

Returned to smaller sized firm in Jan 2011

Entire career spent dealing with start up to medium sized entities

@simonmurrison

The Firm - Our Philosophy

Our client base consists predominantly of owner managed businesses with challenging demands and changing requirements. We are committed to providing all our clients with the best professional and commercial services.

@simonmurrison

How to Approach the bank for funding

@simonmurrison


Be prepared before you approach the bank

@simonmurrison



Get your management accounts up to date – need to demonstrate your trading history / understand trends.

Prepare profit and loss, balance sheet & cashflow projections for a minumum of 3 years ahead

Profit & loss / cashflow is not the same thing – key differences are timing & VAT

Have sound assumptions that your projection pack is based upon

@simonmurrison



Include commentary on your business your expertise in the product / market industry sector your current market place target market place SWOT analysis

Ensure you approach the correct bank for your sector

All key points that your Accountant should be helping with.

@simonmurrison


Test the numbers – the bank will

Include sensitivity analysis Consider seasonal fluctuations Think about effect of changing the assumptions Do the numbers stack up

@simonmurrison


Understand ‘bank talk’

Bank covenants – devil is in the detail (who reads them)? EBITDA – Earnings Before Interest Tax Depreciation & Amortisation Underlying cash generation of business before servicing of debt, tax & fixed

asset write off Measured against the cost of servicing the debt – interest cover Allows bank to calculate head room for movement in interest rates Not just financial measures Reporting deadlines

Year end Management accounts – 30 days after quarter end (EFG)

Debt serviceability – how is it going to be repaid?

@simonmurrison


Understand ‘bank talk’

Security Property - max (65%) Cash cover – residential 190%, commercial 160% Rental yield needs to be good to build headroom if base rate goes up Value of debtor book Personal guarantee Floating charge – very hard to get as difficult for the bank to recover their losses

(past bad experiences)

Identify the funding gap & think through the type of funding most appropriate Standard Overdrafts – thing of the past Invoice finance Asset finance

@simonmurrison


Understand why the bank might say no

Why do you want to borrow the money? Banks generally will not fund HMRC! Your business plan & accounts Your business cashflow, profitability and existing commitments Any personal financial commitments that affect the business How you have handled your finances in the past Information held by credit agencies Any security provided

@simonmurrison


Future reporting requirements

Comparison of actual to forecasts Progress on existing / new contracts Revised cashflow forecasts Major capital spending proposals Yearly accounts & management accounts Debtors & creditors information

Ensure you address it before you proceed

@simonmurrison


Show confidence

If you don’t believe in your request then why should the bank fund it Be prepared to show your commitment – if you are not prepared to then the

bank will not do so either Think about getting your accountant to present the numbers When the client meets the bank the numbers should already have been in

principle agreed Client will in general then only talk about their product rather than finances Client in comfort zone

@simonmurrison


@simonmurrison

Email – [email protected] – (email for copy of slides!!)

Tel - 0141 226 8484

Linkedin – Simon Murrison

Twitter - @simonmurrison

Check out our affinity scheme at – www.glasgowchamberofcommerce.com

glasgow for business 07.11.11

Documents