Here at BOOST&Co, we like to think we understand SMEs, from the intricacies of their business models to the ambition underlying their strategies for growth. But we’re not psychic, so when a company applies for a term loan – via our existing products or the Coronavirus Business Interruption Loan Scheme (CBILS) – we need financial information that’s easy to understand.
We’re flexible and we fund fast, but although we pride ourselves on a smooth, swift process, this can be hindered if the records you submit don’t include the necessary information. With the correct details to hand, we make decisions quickly, so the more robust and comprehensive your financial information, the better.
This will increase the speed with which we can get funding into your bank account – so, without further ado, here are the key documents you’ll need to provide.
Proof that you are eligible for a loan
Recent changes to the “undertaking in difficulty” test mean that this assessment is now made on the date you apply for a CBILS loan. In carrying out the test, we will look at your financial information for the 12 months preceding that date.
We need to see your management accounts for the previous financial year (month by month) and your latest year-to-date management accounts, both in Excel format.
To be eligible, your group should demonstrate one of the following:
- on the balance sheet, accumulated losses are less than 50% of share capital;
- or total group revenue is less than £9m and there are fewer than 50 (full-time equivalent) employees in the group.
We also need to see that at least 50% of trading takes place in the UK.
Tip: where possible, include percentages of revenue generated from trading activities in the UK. Note that if your product or service is generated in the UK and traded globally, this may be considered as trading in the UK. The more information you can provide, the easier it is for us to assess.
A comprehensive and realistic business plan
We need to see that you expect to achieve profitability within 12 months of receiving a CBILS loan and that you will be able to make monthly repayments when these are due.
To demonstrate that your company can repay the loan, you will need to supply:
- a three-year monthly integrated business plan, including a P&L, a balance sheet and, most importantly, a cash flow statement (in terms of IFRS IAS 7), in Excel format.
The operative word is “integrated”, meaning that the numbers are all linked and move when we change revenue or expense line items. We run sensitivities on your numbers and can only do this if the model enables us to change assumptions on your P&L.
Tip: if you have numerous revenue streams, split these out by revenue and gross margin so that we can really understand your business.
Evidence to back up your assumptions of growth
This is often the area that can be the most subjective, so we need you to demonstrate clearly how you plan to achieve your forecasts. The information you submit may include:
- details of signed contracts that are yet to generate revenues;
- a pipeline of opportunities (accompanied by the probability of conversion);
- information about new products that are yet to be launched;
- your plan for attracting new customers.
Tip: these assumptions of revenue growth must be supported by evidence of historic growth. Our confidence in your forecasts is dependent on the details you provide.
A sunset scenario
In addition to your business plan, we need to see a scenario in which you have to wind up your company to repay a CBILS loan with no growth. This means dramatically reducing your cost base so that the business can use existing revenues to repay the loan.
Tip: we don’t look at typical bricks-and-mortar firms, so we understand that you are unlikely to have fixed assets to liquidate. We therefore need to understand which alternative methods you will use to repay the loan if things do not work out.
Other useful documents
There is no such thing as “too much detail”: when it comes to understanding your firm, we want to see as much information as you can provide. Other documents that will help us to process your application swiftly include:
- a cap table showing the ultimate shareholding of the group;
- your company group structure (including the countries in which any subsidiaries are registered);
- biographies of the key members of your management team;
- a list of your top ten clients, plus the revenue and the percentage of total revenue generated from these customers during the past 12 months;
- and a slide deck explaining your business, history, products, customers, market, competitors, USPs, ambitions and goals (this document is useful but not required).
Having attended, voted on and chaired more than 100 credit (investment) committees, I know that it makes a difference when companies supply information that is detailed, integrated, robust and easy to understand. This enables us to make swift decisions and, if your application is successful, move quickly through financial due diligence and fund your loan within four weeks.
Now that CBILS has been extended by the government, you have until 31 March 2021 to submit an online application – which means plenty of time to compile a pristine set of financial information. We look forward to seeing it soon.
Read our principal Ryan Sorby’s insights into why CBILS is ideal for funding ambitious growth strategies
Read our principal Joanna Scott’s expert view on how M&A is bouncing back – and why now is the time to act
If your SME is looking for funding, contact our principals – Kim Martin (London), Joanna Scott (London), Ryan Sorby (Manchester) or Faye McDonough (Cambridge)
We provide the government’s Coronavirus Business Interruption Loan Scheme – get more details here