What You Need to Know About Small Business Plans Part 2
From a macroeconomic perspective when governments run out of buttons to push to stimulate growth they must encourage it from other areas. This is where entrepreneurs and the green shoots of small business emerge, albeit in many cases driven by desperation. With a raft of banks announcing support for small business it is no surprise that interest in small business plans has increased.
The Need For Small Business Plans
While record low interest rates may indicate that it now is a great time to seek finance for a new business it must be noted that credit conditions for business loans have tightened significantly since the financial crisis. Banks and other lending institutions may have renewed appetite for small business initiatives in a bid to diversify their portfolio risk profile but they have now developed a heightened awareness for the risk involved. More specifically the return on equity parameters for banks has changed. There is no more easy cash for banks to on-lend to businesses and this means that analysis of the risks has become even more important, as have small business plans.
Emphasis on the financial analysis contained within small business plans has increased. It is not good enough to produce simple sales and cash flow forecasts anymore. Lenders want to see detailed cash flow analysis, particularly around working capital requirements in terms of debtor and creditor management and serviceability of debt. The reason for this is because banks have become much more targeted in the type of facilities they will look to provide to maintain their profit margin and they need this information to assess cash flow risk in your business.
Gone are the days of the “one size fits all” flexible credit line for your business. The diversification and segmentation of financial products means that the level of information required to secure a business loan has increased significantly. This places even more importance on an insightful small business plan.