modules/business-planning/references/financing-assessment.md

# Financing assessment within the planning loop

The question is whether the proposed financing fits this business and its evidence.
Use the user's mandate and actual instrument terms. No financier-specific acceptance
is implied by completing the report. The questions below guide model reasoning;
they are not a scoring rubric or universal underwriting policy.

## Bank debt

- **Business credibility:** product, customers, demand evidence, pricing power,
  operating capacity and concentration risks. Explain why forecast sales and costs
  are plausible and what remains a hypothesis.
- **Use and structure:** amount, purpose, draw dates, borrower contribution,
  tenor, interest, fees, grace period, amortization or balloon, and funding already
  committed versus sought. Reconcile these to the same cash model. Explain any
  mismatch between asset/cash-conversion timing and the proposed loan.
- **Repayment:** operating cash available after working capital, investment and
  existing obligations, through the proposed maturity. Bind cash, principal,
  interest and coverage to the model. Its CFADS/DSCR convention is disclosed in
  the case contract; it does not establish a lender covenant calculation.
- **Downside:** choose plausible adverse scenarios from business evidence, such
  as slower adoption, lost customers, pricing pressure or delayed collection.
  Explain cash pressure and the operational or financing response. Do not use
  arbitrary percentage shocks as proof of robustness.
- **Borrower:** historical and current accounts where available, existing debt,
  payment behavior and relevant credit reports supplied with authority, owners,
  management execution and sponsor contribution. An idea-only case retains these
  gaps and can conclude that the requested debt is premature.
- **Security:** supplied guarantees, collateral, enforceability information and
  limits on sponsor support. These cannot stand in for unsupported repayment cash.
- **Requirements:** use the selected lender's current documents, information
  requests and contractual definitions. Distinguish verified requirements,
  provisional assumptions and unknowns. No universal DSCR cutoff is supplied.

## Venture equity

- **Market:** customer problem, reachable opportunity and growth, willingness to
  pay and timing. Distinguish evidence of purchases from market-size assertions.
- **Advantage:** customer alternatives, competitors, switching and the plausible
  persistence of an advantage as competitors respond.
- **Traction:** adoption, retention, customer economics and evidence that growth
  can repeat; use sector-appropriate evidence rather than mandatory SaaS metrics.
- **Team:** relevant execution capability and the gaps that funding must address.
- **Milestones:** amount sought, use of proceeds, sequencing and specific business
  uncertainty resolved by each funded milestone. Distinguish targets from results.
- **Runway:** current cash, funding timing, burn and the next financing dependency;
  show an adverse path and explain what happens if a subsequent round is delayed.
- **Returns:** existing ownership and proposed terms, dilution, future capital
  needs and plausible exit/return mechanisms. Do not invent a valuation, exit
  multiple, dilution schedule or IRR when terms are missing. The shared engine
  models company cash, not a complete cap table or security-specific waterfall;
  label that analytical limitation explicitly rather than manufacturing metrics.
- **Requirements:** fit with the actual investor's stage, sector, ticket and
  mandate when sourced; founder preferences and governance constraints matter.

## Connect to the next iteration

State the financing conclusion separately from the business recommendation. Record
what would change each. For example, credible customer pricing evidence may improve
margins while a competitor response lengthens adoption and makes near-term debt
repayment unrealistic. Compare changing the loan structure, reducing the launch,
adding equity, testing before funding, or not proceeding, as the evidence warrants.

Use a short recommendation and substantiated narrative, not just filled headings.
Read every assessment for relevance to the actual financing decision. Structural
coverage, a positive ratio and a reviewed source label cannot establish quality.

Background sources consulted on 2026-09-09; refresh when relevant to a live mandate:

- [EBA loan origination and monitoring](https://www.eba.europa.eu/activities/single-rulebook/regulatory-activities/credit-risk/guidelines-loan-origination-and-monitoring): EU lending assessment context. Verify the applicable text and institution-specific requirements; this workflow does not certify compliance.
- [BDC: lenders and investors](https://www.bdc.ca/en/articles-tools/blog/what-difference-between-lenders-and-investors): different financing decisions and the use of cash forecasts in repayment structure.
- [Sequoia: writing a business plan](https://sequoiacap.com/article/writing-a-business-plan): customer problem, market, competition, business model, team and financial context for investors.