How can you use financial projections to convince lenders to finance your business?

1 Why lenders care about financial projections

Lenders want to see that you have a clear vision of your business goals, strategies, and performance. They also want to assess your ability to repay the loan and manage your cash flow. Financial projections show lenders how much money you expect to make, how much you need to spend, and how you will handle any fluctuations or uncertainties. By presenting realistic and accurate financial projections, you can demonstrate your professionalism, credibility, and confidence.

3 How to present financial projections

Presenting financial projections requires clear and concise formats and language. Your presentation should include an executive summary, an income statement, a cash flow statement, and a balance sheet. The executive summary should provide a brief overview of the purpose, scope, methodology, assumptions, and results of the projections. The income statement should show revenue, expenses, and net income for each month or year. The cash flow statement should outline cash inflows and outflows for each month or year, as well as how cash balance changes over time. Finally, the balance sheet should show assets, liabilities, and equity at a specific point in time.

4 How to explain financial projections

Explaining financial projections requires relevant and convincing arguments and evidence. Justify your assumptions and methods, showing how they are based on reliable data and industry standards. Acknowledge any limitations or uncertainties in your projections, and how you have mitigated or accounted for them. Benchmark your projections against industry averages and best practices, highlighting any gaps or opportunities in your market, and how you plan to exploit or address them. Align your projections with your business vision, mission, and objectives, and show how they reflect your strategies and actions. Demonstrate how your projections measure progress and performance, and how you will monitor and adjust them as needed.

5 How to handle feedback and questions

To handle feedback and questions, you need to be prepared and responsive. You should anticipate the most common or challenging questions that lenders might ask, and have clear and concise answers ready. You should also welcome constructive feedback and suggestions, and show how you are willing to learn and improve. You should avoid defensive or vague responses, and admit any errors or gaps in your projections. You should also follow up with lenders and provide any additional information or clarification they request.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?