Corporate Finance
Building a financial model your lenders will actually read
- Article
- 1 min read
Assumptions stated plainly, a sensitivity that shows you have thought about downside, and a cash flow that ties back. What separates a model that raises funding from one that stalls.
A model exists to answer a question: can this business service the facility being requested. Everything that does not serve that question is a distraction, and reviewers notice.
State the assumptions plainly
Put every assumption on one sheet, each in its own cell, each labelled. No figure typed inside a formula. A reviewer who wants to test what happens when the growth rate halves should be able to do it in one edit, and if they cannot, they will assume the model is hiding something.
Show the downside
A model where every line rises smoothly is not persuasive; it reads as optimism rather than analysis. Include a case where the main revenue driver disappoints and show what happens to cover. Demonstrating that you have thought about the downside builds more confidence than projecting a scenario where nothing goes wrong.
Tie the cash flow back
- Opening cash plus movements equals closing cash, every period.
- The balance sheet balances without a plug figure.
- Debt service coverage is calculated explicitly rather than left to the reader.
This note is general guidance, not advice on your circumstances. Requirements differ by organisation and change over time — speak to us before acting on it.
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