Free consult & free copy of book

E-Myth – “Why most small businesses don’t work & what to do about it”

Contact Us


Most 5 star CPA Google reviews in Canada

Read Reviews

Chartered Professional Accountants E Myth

1 Fixed Monthly Fee - Planning | Accounting | Taxes | Consulting

Helping Canadian businesses beat the odds!

Business Plan Executive Summary Financing Required | Edmonton CPA

You know, how do we make that business plan a four goal, five minute power play. What are the questions that these business owners need to ask? Cool. Hmm.

Yeah, I can see why cause it’s mad I,

hi. Thanks for joining us for another episode of ask spurl CPA. Today we’re talking about the Edmonton CPA firms, Berlin associates. We’re talking about business plan, executive summary financing required. So your business plan, the executive summary Section and the financing that’s required. I have call here with me again today. Coal. You saw an interesting happening in the hockey game last night that you’re watching.

Yeah, that’s crazy. There’s like 10 minutes left and the sharks were down by three and they got a five minute penalty and or five minute power play. They scored four goals on that and ended up winning the game and one more time. So pretty, pretty exciting. Playoff hockey.

So they capitalize on their opportunity. They had their shot and it took her, I’m going to tie this one back in to this lesson on how to ask for financing. You know, is it scoring four times in a five minute power play? So the quote that we have here is bedroom Franklin. Edmonton CPA, you know, if you fail to plan, you’re planning to fail. And we use that one a lot for it from we’re talking about business planning and the software manufacturer. Palo Alto, you know, when he did the survey of business owners who you’ll regarding business planning and they founded the business owners who completed business plans were 50% more likely to grow their business. Um, and the story that we have here is business owners don’t get the right type of financing because they weren’t specific in the type of financing that they were asking for. They didn’t ask specific in exactly what they need and what terms they needed in the business plan. You know, when they had their shot, they had their five minute power play and they didn’t ask, they didn’t take any shots. So, you know, how do we, how do we make that business plan a four goal, five minute power play? What are the questions that these business owners need to ask?

Uh, well, number one, what is the executive summary?

Executive summary is the most important part of the business plan and that is right at the beginning of the document. It’s the summary of the most important factors of the business. You know, the one that they’re the high level bankers and might be the only one that they read. Edmonton CPA, some of the supervisors and you know, for the business owner it’s the summary of things that you should reflect back on. Even when things are busy, you can use that executive summary, uh, without having to go through a 40 page document.

Specifically list the desired financing and the executive summary.

Yeah, you, we need to list not just how much you want but the, exactly what form that financing is going to take place in mortgages in the term loans and credit cards and mountain. What’s the security on that? We need to be ultra specific, not just a level, not just one number. If you just list one number, you’re not getting what you want. You have no idea what you’re getting and they quite frankly have no idea what they, what they should give you either. Are you going to ask specifically about what you want? Should you differentiate between term loans and a lot of credits? That is normally the, the, the functions of the most banks are going to offer, you know, they’re going to give it a mortgage. Um, that’s, you know, one type of financing product. Then they’re going to get a term loan and that’s going to be another, a financing product.

Then they’re going to give an operating loan, a revolving line of credit that’s going to be a third type. And then even credit cards themselves are going to be a fourth type. And it’s usually, you know, most businesses are asking for multiple forms of those types of financing. In most deals, they’re usually need a credit card and something else. Uh, with an Edmonton CPA, a lot of businesses, they need all four. You know, they’ve got a building and they’re going to put equipment in the building. Um, you know, and they need a line of credit to meet payroll on the credit card as well. They did all four. Um, so we need to be really specific about what types, who want because they all look differently. And we’ll have different terms. Do mortgages normally refer to financing and real estate? Yeah, so you know, conceptually mortgages and terminals, they look really similar.

But usually when people are talking about a mortgage that’s going to be secured by real estate, with an Edmonton CPA, you know, the, the, the functions other than look very much the same on term loans. But usually when we talk about mortgage, it’s relates, it’s secured by a piece of real estate. Do you need to list the purchase, the purchase or construction costs with the amount requested. So they don’t just want to know how much you want and they don’t just want to see the plan. They want to know specifically how much did it cost to buy that land or building that you just purchased a on the mortgage or how much it’s going to cost to construct it. So I mean this thing is going to cost $1 million to construct and we want the bank to loan 80% 800,000 or did this thing costs 500,000 to construct.

And we’re asking for 600,000 on a mortgage. So it’s not going to make a lot of sense. It’s not going to go over so well at the bank. So let’s be really specific on, you know, with an Edmonton CPA, what, you know, what it costs to purchase it, what it’s going to cost to construct it, and what exactly the amount of the mortgage that we’re asking for on that product. Why should you list the interest rate that you’re looking for? Um, you’re almost, you know, putting them on the spot. You’re almost pressuring him. That’s, that’s your, you know, thrill. You miss 100% of the shots. You never take a, I don’t think there’s another hockey quoted in there. So 100% of the shots you never take. So ask them. My model is based on me getting this interest rate. You know, I’m, it’s based on me getting prime plus 1%.

Um, you know, me getting prime plus 3%, whatever that number is, let’s make sure that, that, uh, with an Edmonton CPA, that we asked for it because they’ll know that, okay, if this is charging more interest rate, how close are we? Um, do we need to be more competitive? Is this the right product? Are we just dealing with the wrong bank altogether? Uh, because they want to give us prime plus five and we’re looking for prime. We know someone down the street is going to give us prime. It’s not spinning our wheels with a bank that’s going to give us, you know, the wrong rate. Why do you need to be specific about the amortization period? The amortization period is so key in a lot of people thinking that you think, okay, what’s the rate? What’s the rate? What’s the rate? What’s the rate? Well guess what? If the rate is an extra percentage point, but at 20 year term becomes a 10 year term.

You can’t make payments, you know, the term of the payment and you’ve got 1 million bucks and you got to pay it back in 10 years as opposed to 1 million bucks, you’ve got to pay back in 20 years. It’s drastically different, you know, uh, in the, that can be the skew. And it wasn’t very often that the deal that we go with or the deal with, the recommend our clients to go with is not necessarily the cheapest rate, but it might have the best amortization period and they might be doing the biggest percentage of the financing and they’re getting 20 years, with an Edmonton CPA, on 100% and someone else is saying, um, yeah, okay, we’re going to give you 100% but 20% of it is over five years. And that cashflow in those first five years, this is the tightest that’s of they’re trying to grow the business so that the period that they’re advertising the Lomo or the period that you’re having to pay back that loan over, I mean it is, it’s the crux.

It’s almost always high ranked higher on the priority list than the, the interest. Often we can live with another percentage point on the interest, but we can’t, we can’t even make the numbers work if we have five extra years, you know, five less years to pay back the loan. Do separate pieces of equipment or leaseholds often have separate term loans. Yeah. So sometimes when you’re asking the bank for money, we think that it’s all just going to come in one big lump sum. But usually how it’s going to work is, you know, you’re going to have a mortgage on the real estate, maybe a mortgage on the, with an Edmonton CPA, the real estate in the shell of the building for example. Um, and then on the leasehold improvements, it’s going to be a completely separate product. And often that product, it might have a different rate and a different amortization period.

Um, it’s unusual that everything’s going to come, you know, a lumped together in terms of, you know, and you might have two different pieces of equipment and each piece of equipment you might have, you know, a truck, it’s $50,000 in the leasehold improvements, that’s 150. They might have different rates and different payback periods. It was really common that significant pieces of equipment are going to be like a separate loan account altogether. They’re not just going to be lumped into one, a one giant, some, um, that, that’s a very realistic possibility. So we want to be really specific and just be aware that, you know, you get those loan documents from the bank and you read the first one, well there might be for the loans that they’re proposing back, uh, that might be the, the letter that they’re sending to you. So we have to be aware that, you know, different significant items might have different credit facilities attached to them with different terms.

What are the advantages of lines of credit? So line of credit is, is it’s, it’s almost like the holy grail if you can get the right rate, with an Edmonton CPA, because line of credit gives you ultimate freedom on the payback period. You know, you’re, you deciding do I want to just make the interest payments? A lot of times the line of credit, we can just make the interest only payments and we’re not locked in to those principle repayments. And often it is, especially in startup phase or some sort of growth phase where we’re cash is at a premium, you know, it’s that line of credit that’s the most advantageous, proven or not making any prison payments. It’s just interest only. Um, and if you can get it, that’s fantastic. Now often those are the hardest facilities to get to the bank and you know, prefers to lend on hard assets over a term.

Uh, so they prefer to give you a mortgage or a piece of property or a term loan on a piece of equipment or leasehold improvement line of credit. It’s always a little bit uncertain for the bank, especially in Alberta, they’ve really tightened up on what they want to give lines of credit for, you know, even in the last, you know, three or four years. Um, but you know, if you can get a line of credit, you might even live with a higher rate for that added flexibility. You remember, you can also pay it back and then redeployed if another opportunity arises to whereas a term loan is paid off and it’s done and you’re going back through the process all over again. Well they also need credit card limits needed to evaluate larger terminal illness. So sometimes people think that, okay, I just get my term loan, we’ll work with the credit cards later.

Just get it all worked out at once. Uh, because sometimes that credit card that you absolutely need, you know, you need a $50,000 limit on your credit card because you have a lot of supplies that come through and they bill your credit card. Guess what? They might not be able to give you the million bucks on the term load. You know, they could give me nine 15 in the term loan, give you 50,000 on the credit card cause you’re only approved for a million. Um, get those credit card limits. I know ironed out right away a to make sure we got the right total financing. Um, because a lot of people aren’t going to be very aggressive and getting credit cards once someone else has first charge when they call on the corporation. So you’re kind of stuck with getting your credit card, uh, sometimes from that bank who has first charge on the corporation.

And then you want to be really specific about what you want on the credit card limits. And even even more specific, which one of your staff gets that limit. So it might be a $50,000 corporate limit and you’re the business owner gets 30 and you have, you know, an assistant gets 10 and the frontline worker gets another 10 and that’s your 50 you’ll put those names and those people read on the business plan in the financing required section, just make the, the process go so much smoother. Those are one of the points where the, the, the process starts to drag on because like, oh, what the 11th hour, what’s the credit card? Who’s going to get the credit card limit? How much does it need to be? We know there needs to be a credit card and most business, let’s put it right on there, with an Edmonton CPA, of what we need to rate to begin with. So I think that’s what we have here today, talking about, you know, the business plan, executive summary, financing required section. So as always, please leave some comments so we know, you know, what you guys would like addressed in future videos. As always, please hit the like and subscribe buttons so we can continue to deliver you tips on how to beat the odds of business. Thanks very much.