Funding growth: How financial projections can help

Iron Horse Security and Investigations president Robin St. Martin first sought advice from Ottawa accounting firm GGFL at the suggestion of his bank.

Iron Horse was growing and looking for cash to finance new contracts. The bank’s loan officer figured St. Martin would benefit from some holistic accounting advice.

That was five years ago and when he first met with GGFL partner Anne Van Delst.

“Anne and her team went over our books and quickly showed me potential tax savings that were available to me,” recalls St. Martin. “It was gob-smacking to learn that I had potentially overpaid CRA and would never get that money back.

“So I figured I was losing money by not being with GGFL,” he adds. “That was the start of our relationship.”

More recently, Iron Horse experienced unprecedented growth and with it the need for increased funds to finance new contracts. Like most business owners in that position St. Martin needed an increased line of credit, or loan.

“We reached a revenue point where the bank was asking for more documents and for information that I couldn’t begin to understand,” he says. “They were asking questions that are beyond the average business person unless they have an MBA or commerce degree.”

Van Delst and her team prepared cash flow projections and financial statements and, says St. Martin, “gave the bank a better picture of the company than I could have given myself.”

The clincher, he says, was a meeting with the bank’s loans officer.

“Anne came along and when it got into the nuts and bolts of higher finances, she answered the questions. She spoke the bank’s language and the financing was closed right there.”

Changes in a company’s fortunes raise red flags, says Van Delst.

“When a company approaches the bank for funding to help with anticipated growth, the bank generally wants to see more detailed information including financial projections to help it assess risk,” she adds. “It’s a large part of getting a loan, or line of credit.” 

In other words, Iron Horse had to convince the bank of its ability to repay.

Owners of growing businesses also have to ask themselves tough questions, says Van Delst. Most important: It’s great I’ve got the contract but how am I going to finance it and is it worth the money I’m investing?

“When a business grows, you’re investing in  a lot of costs up front before you’re seeing money coming back,” she says. “It’s usual to see a lot of cash tied up for a long time.

“You never want to be at risk that you can’t pay your employees, the bank or the government (taxes) – and, of course, yourself.”

For any business in an Iron Horse-like situation, finding a trusted financial advisor is crucial.

“It isn’t enough just to get your annual financials done,” says Van Delst. 

“At GGFL, this isn’t a once-a-year thing. We look at the future. What’s happening in your company, and your family. It’s all about getting to know your clients. When you have that knowledge, you can help them grow.

“So don’t wait until something goes wrong,” she adds. “It’s too risky and isn’t worth the stress.”

St. Martin, who has been there and experienced the stress, agrees.

“It’s great to have the support of people who want you to grow and succeed,” he says. “GGFL has never been further than a phone call away, even if it’s just to answer a dumb question.”