3-yr projection

[brookbend]

Attach'd find 3-yr projection.

Q: When, how is investor's money paid back if interest + bonus is due?

Thanx.

[peterjhale]

Hi and welcome to the forum

You'll need to produce a cashflow - that's why you need investment to keep the cash positive.

Produce a cashflow without any investment monies coming in (assume that the investment you think you need will develop your business as you would like)

Then you know how much cash coverage you need by year 3

Say it's 100k negative. And your investors want paying back after 3 years.

That means you can't do it !

You'll need to produce a cashflow until it is positive - say this is in 5 years time - that means your business is self generating at that point.

Find the worst negative month in your cash flow. Add the interest rate roughly compounded for the term of the loan. If your year 5 can cover this interest then that's what you need (as you need to pay back the loan and interest)

I would say that people would probably not lend on a 5 year position (if you produce negative cashflow for 4 !)

So try and have positive cash by the end of year 2

Hope this all makes sense as it's quite tricky to explain when it's not face to face !

[brookbend]

You're right, it's a bit complex and finance is my weak spot - can I call you on phone?

[peterjhale]

Hmm - we don't yet offer phone consultations I'm afraid.

Why not have a look at Business Plan Express as this has financial projections and spreadsheets so you can put together all your finances

Write a business plan

Peter

[brookbend]

Is that positive cash flow AFTER the investment?

[peterjhale]

Assume you've got the investment but you don't have to pay it back.

Build your cashflow knowing you have the money to develop your business.

When will your cashflow be positive.

If it's 3 years away you are wasting your time.

However, if after 12-18 months your business is positive you'll know this is the first time everything is going right.

Then factor in the loan. The loan amount will be the accumulation of negative cashflow til that positive point PLUS the repayments

[brookbend]

If I use $157k in January of yr 1, then In Oct I see $3,000 positive earnings.

In yr 2, if I use $388k in January, then on Oct 1 we earn $183k.

accumulated negative cash flow = ?
repayment = ?

[peterjhale]

This is getting a bit tricky for a forum

I suggest either:
a) you get our business planning guide which has a cashflow projection model
b) you speak with an accountant/ businesslink advisor etc

[brookbend]

...I wasn't asking for definitions -- re: last request

Just #'s derived from the projection.

[peterjhale]

Originally Posted by brookbend

If I use $157k in January of yr 1, then In Oct I see $3,000 positive earnings.

In yr 2, if I use $388k in January, then on Oct 1 we earn $183k.

accumulated negative cash flow = ?
repayment = ?

Well you'll need to see earnings for yr1 for Nov and Dec - assume they are $3k also.

Loans generally are paid back over 3 years so if you took out 157k and this covers all your net cashflow until Oct then the repayments are approx (157+7%/36 months) $4.67k per month. Of course this will then put you $4.67k per month under from when you start your loan so you'll probably need to borrow an addition 10x$4.67 just so you can pay it back.

The loan of course will be in yr 2 also per month.

so , year 1, borrow approx $200k - pay back @ approx $5k per month
end of year - cash neutral.

year 2 - borrow approx $400k - payback approx $10k per month PLUS the $5 k from previous year.

repayments in year 2 = $15kx12=$180k wiping out all the cash for your Oct - so the only cash you'll make in year 2 is from Nov + Dec less 2 payments of $15k (ie: $30k) whatever that'll be.

So if you make $100k in Nov/Dec then your overall positive cashflow by the end of 2 years slog is $70

Only you'll know if it's worth it..