Understanding the Importance of the Financial Projections in Your Bank Business Plan

1. Understanding the Importance of the Financial Projections in Your Bank Business Plan If you are not a financial wizard, comfortable in Excel, or downright enjoy numbers, there is a good chance you had someone else create the Financial Projections for your business plan. Many people have professionals assist in part, or all, of the Bank Business Plan creation. While it’s true you don’t need to know advanced accounting principles, you do need to have a thorough understanding of the financials projections. Not only will you, as a business owner, likely be expected to explain them, they are the foundation of understanding what’s going on in your business. The first step in understanding the financial projections in the business plan is to appreciate them. If you are pursuing a bank loan or line of credit, their worth is obvious. They are an expected requirement of the overall bank business plan and presentation. So, why do financial projections beyond the business plan matter? They set the benchmark for your business. They force you to consider the long-term objective and direction of your business and map out how you may get there. They are also the benchmark against which you will measure your success.

2. The financial projections are presented in the format of your financials. This allows you to compare your business’s actual performance to the financial projections in your Business Plan. Whether or not you routinely update your business plan, you should update your financial projections at least annually. Having this sort of measuring stick gives you a basis for evaluating your performance so you can adjust as needed. There is no part of the bank business plan which is completely independent of other sections. The entire document, if done well, will be cohesive with all sections reinforcing and strengthening other sections. With that said, the financial projections of your business plan are one of the most informative. The Financial Projections are the culmination of consequences of all the decisions you will make for your business. Those reviewing your bank business plan are interested in many elements of your financials, but mainly your profits and cash flow. When presenting your bank business plan, one of the most important things for the loan officer will be determining if your business will be able to pay its loans. Beyond the financial projections in your bank business plan, they will also be interested in your personal financials. The bank business plan format is one of the best ways to present all this information and tie it in together. It allows you to paint a picture, with numbers, of how your business will sustain itself while also demonstrating you can cover the loan if the business fails. There are a number of reasons the financial projections in your business plan are a key aspect of your bank business plan. They are far from the only important element but, certainly near the top of the list. Being aware of their importance can help you know where to focus your intention and efforts not just on your Bank Business Plan but, in general business planning.