Financial Plan

Rookies and Newcomers:
The Road to Success
Group Sales
Attractions Mix
Facility Design
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David Cohen
President & CEO
Spencer Norton
Sales Executive
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• Current Banking and Lending Environment
– How does that impact your business plan today?
• Credit
– What is important in order to obtain financing?
– The 4 C’s of Credit
• Financial Planning
– What should be included in your plan and why it
is important.
• Q&A
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Current Banking Environment
Consumer Spending Trends
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Bank Trends
# of Reporting Financial Institutions
# of Reporting
Source: FDIC Statistics
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Bank Trends
• Why have the number of banks declined?
– Failures
– Closures
– Mergers
• Additionally, there are 651 institutions that
are considered “problem institutions" by the
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Current Banking Environment
“The aggregate value of small business loans
outstanding from depository lending institutions was
$587.8 billion in June 2012, $19 billion less than in June
2011. The decline in small business loans slowed from
6.9 percent in June 2011 to 3.1 percent in June 2012.
This smaller drop in the value of small business loans
suggests that although small business lending terms and
standards are easing, standards remain fairly high.”
Small Business Lending in the United States in 2012
Report by the U.S. Small Business Administration – Released July 2013
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Current Investment Environment
Impact of the Affordable Care Act
“To raise capital, if you’re in a growth mode, you want a
CFO who exudes creditability,” say Christian Oberbeck,
CEO of Saratoga Investment Corp., which provides
loans to and invests in small businesses. We’ve walked
away from financing a number of companies because
they were unable to prove their compliance efforts would
work or provide a sober view of the financial impact,” he
Health Law Stirs Lending Worries for Small Business
Wall Street Journal, 10/15/13
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Some Good News – US Consumer Spending is up!
The Number of Part-Time Employees has Increased
Source: Bloomberg, SVB Asset Management
Rates are Expected to Stay Steady Through 2016
Most Fed officials last month (September 2013) predicted drag from
fiscal restraint, a slow recovery in housing markets, and tight credit
would cause them to hold the benchmark lending rate at 2 percent or
lower until the end of 2016 to support growth and job creation.
Source: Bloomberg, Washington Budget Chaos Keeps Fed Rates Low for Longer
By Craig Torres & Caroline Salas Gage - Oct 10, 2013
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What does this mean for you?
• Many Banks are challenged to extend credit for new loans
(especially for new businesses or new projects).
• Dodd/Frank has created huge degree of regulation and scrutiny for
all banks, thus making it difficult to obtain financing from banks.
• Compliance with and calculating the effects of the Affordable Care
Act has added additional complexity
• Most lenders are looking for lower debt to equity ratios for new
projects, which means you need to have invested capital in your
• Most new equipment purchases require a down payment.
• Small business owners must personally guarantee any debt and
have significant equity in the business.
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What does this mean for you?
• Lenders will require periodic financial statements reporting so
they an monitor your business and progress.
• Credit requests with lenders/banks are taking much longer to
get approved and funded.
• Underwriting requests and requirements are greater today.
• Business and Financial plans will be scrutinized; there will be
great emphasis on “where you got the numbers”
– Assumptions in your projections need to be
reasonable and justifiable
• Personal credit is extremely important to your lenders
– Know you Score !!!
• Over-leveraging your business will be avoided by lenders
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Different Types of Financing for your Business
• Commercial Real Estate
– Typically banks look at R/E favorable, but in today’s market,
extremely difficult and time consuming
• Leasehold Financing
– Probably more challenging in current environment, look to
have the landlord perform the work
• Working Capital
– All based on your performance, cash flows and proejctions
• Equipment
– Seek independent sources and manufacturer assisted
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What do you need to get financing?
The Four’s C’s Of Credit
Capacity = Cash Flow & Capital
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• Good Personal Credit
– Credit card debt, installment loans, student loans, mortgage
– Know your credit history and score
– Look up your credit scores at
• Good Business Credit
– Dun and Bradstreet
– Trade References
– Existing loans and leases
• Your performance is measured as an indicator of how
you will perform in the future.
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Capacity = Cash Flow & Capital
• Existing businesses are judged on the available cash flow to service
current and proposed loans. (to be able to make timely payments)
– This criteria is not based on profits but cash flow
– Examples are included in the appendix
• New businesses will be judged on the projected cash flow and the
assumptions that are inherent in that financial model.
• Make sure to have cash reserves to account for the unforeseen
“stuff” that will happen. This should be part of your assumptions.
• Take advantage of low rate financing.
– The current rate environment is projected to last for a short
time, we may never see these type of rates again
• The right amount of debt is essential to grow a business. Don’t get
overleveraged, that is when problems occur.
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Capacity = Cash Flow & Capital
• Net Worth (you and your partners)
– Personal and/or business net worth is required
– The days of OPM (Other People’s Money) are long over
• Make sure you have updated business and personal
financial statements.
• If you have other profitable businesses, they will had
strength to your ability to secure financing.
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Real Estate
– Take advantage of the commercial R/E market today. This is a great time to
be looking for space.
– Trends show some signs of improving so it may be moving from a
buyers/lessee market to the owners/lessor market.
• Drive the Owners to invest in the property. You need to invest in the
Rides, Games, and Other equipment types
– Measure the strength and value– earnings potential over time
– Evaluate the right mix – use the experts to help. Knowledge is very
– Don’t be afraid to remarket, replace and change mix of equipment over
• Ride and Game Revenue will decrease over time if you do not refresh and
update the experience for the customer
Don’t forget about the “Soft Costs”
– Tax, Freight, Installation, training
– Someone is going to have to pay for this…..
Additional collateral
– Use it to strengthen your buying power, helps reduce down payment
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• This is the subjective area.
• Relationships are important
– Yes, we lend to businesses, but we really lend to
– How you handle yourself, how you communicate,
how you conduct business is critical to the
success of the business and your ability to
borrow money.
– Be open and honest. Surround yourself with
good people, i.e. - employees, vendors, bankers,
accountants, lawyers.
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Financial Planning
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Financial Plan
• The Business Plan will have key components
– A Financial Plan is criteria to your Business Plan.
• Key Areas that a Financial Plan should cover are;
• Investment Considerations – are you looking for investors ?
• Critical Assumptions inherent the the Plan
• Key Performance Indicators ( KPI’s) that help you measure the
• Budgets including
– Projected Balance Sheet & Profit and Loss Statement
– Projected Cash Flow
– Break even Analysis
– Departmental Revenue
• Source and Use Statement
• Debt service schedule and other Financial Ratios that lenders are
focused on
• Longer term plan, more that one year out
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Financial Plan Checklist
• Projections should be:
– Reasonable & Conservative
– It is OK to have a high/medium/low set of assumptions to
help build the model
– Budgets are a measurement tool, not just a set of numbers
to give a banker. If you don’t measure your business
performance against a budget, how do you if you are
performing ? Every month you need to measure your actual
performance against your budget.
– Assume that some “stuff” will happen, i.e – bad weather will
impact your business.
• You will need Cash reserves should be available for the “stuff”
• Include plans for replacement and upgrading equipment
• Cash flow analysis
– This is key to getting the lender to say “YES”!
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Source and Use Statement
Really important, helps the financial people understand the project. Lenders need to
• Source of funds for the project
– How much debt, where is coming from and the terms ?
– How much equity, who is putting money into the business?
• Use of funds for the project
– Where will the money be spent?
• How much on Equipment, Leaseholds, Marketing, Training,
Construction, Start up payroll ?
• Working Capital to run the business until you reach
• Debt / Equity ratio
– Computes the amount of debt divided by the amount of
invested capital. Measures the leverage of the business.
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Cash Flow/Debt Service Calculations
• Cash Flow
– Net Income
– Add back: Depreciation & other non-cash
– Add back: Interest Expense
• Debt Service
– What are the annual monthly payments, P&I, that
the business is contractually obligated to make.
• Cash Flow Coverage is then a KPI.
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When the lenders says “YES”
Keep an Eye out for…
Loans vs. Leases
Acceleration Clauses
Bank Fees
Prepayment premiums
Floating vs. Fixed Rate loans
Add on % vs. APR Rates
Try to leave your personal assets out of the
collateral discussion.
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Key Takeaways
• We are still in the midst of an uncertain economy, and it
is not likely to end next year. Way too much uncertainly
in the US as well as the Global economy.
• Credit is still tight for small businesses as banks
under Regulatory pressure but also have the need to
make loans to make budget. They will be interested
in a sound business opportunity.
• As a small business owner you must make sure to take
care of your personal credit and your business financials.
• Open communication w/ your lender is extremely
important; full disclosure.
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About Firestone Financial
• Founded in 1965
• Focused on the out of home amusement industry
– Expertise in the business.
• Over 2,000 customers in U.S. and Canada
• Currently have over $70 Million in credit lines extended
to our existing customers!
• Relationships and loan promotions with the major
• Simple and streamlined approval process
• You work with the decision makers
• Visit us at Booth #1603 we are here all week!
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David S. Cohen
President and CEO
Firestone Financial
Mr. Cohen has been affiliated with Firestone Financial Corp. since 1986. He
directs the management of all aspects of the business. He participates in the
generation of new business, maintenance of key customers relationships,
serves as a member of the Credit Committee and leads the planning and policymaking functions of the Company.
He was Chairman of the Board of the AAMA (American Amusement Machine
Association), and currently serves on the board. On a local level, he previously
has served on various non-profit community boards and presently is on the
Board of the New Center for Arts and Culture. He is serving a second term as a
member of the Board of Directors and Audit Committee of Holbrook
Cooperative Bank.
From September 1998 until September of 2000, Mr. Cohen was President and
member of the Board of UST Leasing Corporation, which provided equipment
leasing services to bank and non-bank customers. Mr. Cohen was a Divisional
Controller for XTRA, Inc., a transportation leasing company and he started his
career in 1978 at Coopers & Lybrand as a Certified Public Accountant. Mr.
Cohen received a BA in Business Administration from Rutgers University.
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Spencer Norton
Sales Executive
Firestone Financial
Spencer Norton joined Firestone Financial in 2005 as an inside sales
representative and has worked his way up within the sales organization.
He plays a critical role for the organization in developing and growing
relationships with our manufacturers, distributors, operators, and family
fun centers in the amusement and vending industries.
Prior to joining Firestone, Spencer was an executive recruiter with
Commonwealth Resources, responsible for recruitment and placement
of commercial general contractors in New England. A native of Peaks
Island, Maine, Spencer earned his BS degree in Finance from Babson
College in 2004 and graduated from the AMOA-Notre Dame
Management Development Program in 2012.
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1-800-851-1001 ext. 41
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