A profitable business. A financeable business?

Follow the cash, not just the margin.

A company can report a profit while experiencing pressure on liquidity. Customers may pay later than expected; stock may build ahead of a new contract; investment may require cash before it contributes to revenue. A useful financing analysis connects the income statement, the balance sheet and the movement in cash.

Start with a bridge from operating performance to available cash. Separate recurring trading flows from one-off receipts, asset sales and shareholder support. The objective is to explain where liquidity comes from, what consumes it and which assumptions need to hold.

Put the full repayment picture on one page.

Prepare a dated schedule of borrowing, interest, repayments, leases and other material commitments. Add the conditions attached to facilities and the timing of seasonal working-capital needs. A borrowing request becomes more coherent when the proposed use of funds and its repayment pattern can be considered together.

In the EU lending context, the EBA guidelines frame creditworthiness assessment around the borrower’s repayment capacity. They provide a useful reference for preparing a lender discussion, although individual institutions apply their own policies and assessments.

Treat the rating as an assessment, not a promise.

A lender’s internal credit assessment and an external credit rating are different processes. Their purpose, inputs and scale may differ. Neither should be presented as an assurance that funding will be available.

BCI’s suggested preparation is to reconcile the financial information, explain exceptional items and identify the assumptions driving the forecast. Improving the clarity of the file makes the conversation more useful; a particular score, approval or financing term cannot be promised.

Test a plausible setback.

Compare a base case with a downside scenario: slower collections, lower margins or a delayed project. Record the resulting cash requirement, the time available to act and the options management could realistically implement. Sensitivity analysis is useful when it changes a decision, rather than simply adding another spreadsheet.

Prepare the discussion before requesting terms.

Bring together recent accounts, current management information, a working-capital analysis, the debt schedule and a cash-flow forecast with explicit assumptions. Assign an owner to unresolved questions. The result should be a concise account of the financing need and the evidence supporting it.