Projecting Cash Flow

Projecting Cash FlowProjecting Cash Flow:

If you are a new company, the emphasis is going to be on the projected success of your business when you start trying to apply for small business loans. First, loan officers will wish to see potential revenues, or potential income, from your business. To project your startup revenue, you’ll have to research similar companies and their revenue.

You can apply comparable results from businesses in your niche with approximately the same working capital to help project your potential. Next feed in data based on your own company’s best practices. For example, include sales made only for cash payments you receive for each month if you are a small business that gives credit to your clients/customers. In other words, if you give your clients a 180-day window to pay, then your sale should not be counted until the month that you collect the money from your client.

The completed projection cash flow should show a bank small business loans officer what additional working capital your business may need, and will offer proof that there will be sufficient cash on hand to either cover any shortfall or to support interest payments for a revolving line of credit. Your business plan writer should be able to create graphs and timelines that show your company’s capability to meet obligations long term.

Next, you need a sales forecast which will use your small business projection cash flow to show how your sales are going to look in the near future. You can look at what other stores your size is selling, how many households there are in your area, how much will they spend on your type of product or service annually, and what percentage of their spending you are likely to capture compared to competitors. This data may be detailed enough to produce an average sales per day number, which you can multiply by 30 to give you your figure for sales per month.

All of this data can be used to convince a loan officer that your business plan is sound enough to warrant a loan approval.

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