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December 17^th 2020

Fundraising

What you need to know about the corona loan from PMV: Part III

What happens after you make your request?

In recent months, CFOrent has helped various start-ups and scale-ups request corona loans from the investment agency, PMV. For some companies, this loan is essential to survive. That’s why we are using this series of blogs to share valuable insights into PMV and the corona loan.

(For general information about the corona loan, please visit the PMV website.)

‘Expect a longer turnaround time of about one month. Patience will only benefit a credit request.’ – Jan Van Assche, Partner at CFOrent

Good things come to those who wait

After the first checks, the dossier is assigned to your dossier manager: an investment manager. As the corona loan is particularly popular, the promised turnaround time of one month is not always able to be met. PMV assesses your request not only on the basis of figures, but also performs a thorough, in-depth investigation. Don’t panic if the request takes longer than expected. PMV is a major organisation. As a government fund, it needs to follow strict procedures, and be approved by different levels of investment committees.

Five tips for success

Don’t look at the request as a desperate last attempt to save your company. Keep the tone—and your attitude—positive. Emphasise opportunities and your readiness to adjust where necessary.
Build a good relationship with your dossier manager and provide help wherever possible. The more accurate the information provided, the greater the chance they will support your dossier and that it will be approved.
Can your existing shareholders do anything to influence the decision? Maybe they could write a letter of intent in which they declare that they pay the balance in the financing round.
Existing and future clients can also provide a letter of intent. A signed contract with a major client helps boost the confidence of the investment agency.
External advisors like CFOrent help you build a strong dossier, saving you plenty of valuable time. Nonetheless, the first step is to bring management and shareholders into the story. The dossier manager will thoroughly check this.

What do you do if the request is refused?

It does not happen often, but sometimes the entire requested amount is refused. Remain calm and listen to the feedback from your contact person at PMV. Is there any suggestion of a misunderstanding? Is there too little confidence in your product, the market or the team? If you succeed in correcting these fundamental parameters, you can submit your dossier a second time and you’ll have a good chance at success.

European Investment Fund guarantees

On 30 November, PMV and the European Investment Fund (EIF) signed an agreement under which EIF will cover 195 million euro in guarantees. In other words, PMV will be able to recuperate up to 195 million euro from EIF for late subordinated loans that are not paid back. This is good news; through the guarantees from EIF, PMV can offer corona loans up to 150,000 euro at a deferred interest rate of just 3 per cent.

Source: Het Nieuwsblad

Contact CFOrent for support with your corona loan.

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December 17^th 2020

Fundraising

What you need to know about the corona loan from PMV: Part II

How do you prepare a case to maximise your chances of success?

In recent months, CFOrent has helped various start-ups and scale-ups request corona loans from the investment agency, PMV. For some companies, this loan is essential to survive. That’s why we are using this series of blogs to share valuable insights into PMV and the corona loan.

(For general information about the corona loan, please visit the PMV website.)

‘Make sure your business model is so simple that even a complete layman understands it, no matter how complex your product is.’ – Koen Verstraeten, Associate at CFOrent

Act as if the loan is a capital increase

The corona loan from PMV is a loan, not a capital increase. Nonetheless, it is wise to prepare the request as though it is a seed/Series A investment. The loan request is like a rocket: as soon as you push the button, the rocket will launch and nothing else can be changed. Everything must be perfect before the launch.

PMV is a financial institution: they will only give you money if they trust your figures and business plan. Build a completely supported investment case as you would if you were making a presentation to a venture capitalist:

What was the original business model and how do you translate that to the post-corona period?
Is there a concrete sales funnel? How does it look?
Which recent developments have there been within the company and the sector?
Does the financial plan match up with the bookkeeping?
Are the working capital and the operational cashflow recorded in the business model?
How many months can your company survive before all the money has been used up?
What market potential will you reach in the coming months? Will your value increase? Put the emphasis on the expected growth!

Credit analysts love up-to-date figures that are presented in an orderly manner. As such, it may be worthwhile building a data room: this may speed up the handling of your request by several weeks.

This is exemplified by an earlier experience Kristof Beckers, associate at CFOrent, had with PMV: ‘PMV likes to see all accounts in, even if they are at zero. They are not happy with general overviews. They want to see your own equity split up into capital, reserves and carryforward profits. Financial debts, profit and losses, and your cashflow statement also need to be split up by type. I have presented all figures in a PowerPoint, complete with detailed commentary.’

‘Give them as much information as possible with the figures. Stating the obvious is expected.’ – Kristof Beckers, Associate at CFOrent

Recently, PMV began requiring the use of a standard template for financial plans. Ask CFOrent to translate your current or still-to-be-made financial plan in the correct template.

What questions can you prepare?

Make sure that the management is available for different types of questions via email or videoconference. From our earlier experiences, we have picked out a number of returning questions about PMV.

Commercial traction

How does the market look? Who are your competitors?
How popular is your product in the market?
What is the churn risk? Is there a visible increase in client fallout?
- Is the client fallout a temporary phenomenon—whether it’s caused by COVID-19 or not—or are there other factors involved?
- Is there a cohort analysis that splits the total churn based on the age of client relations?
What are the expectations for the coming 18 months? How realistic are they? In the original plans of our clients, 2021 presented as the best year ever, but what will happen if the impact of corona lasts a year longer?

Financial-legal considerations

Your financial plan will be turned inside-out. Make sure you have prepared even the smallest considerations.

What are the estimations based on?
Are the best- and worst-case scenarios realistic?
Does the plan link up with historical results that stand out in the bookkeeping?
Are the costs realistically estimated? Can they still be lowered?
Are client contracts legally closed? What is the notice period?
Is the credit you have requested realistic? We advise specifying the necessary amount, after which PMV will decide how much they will invest and what amount will need to be sourced from other parties.

Internal dynamic

As we said in the first part of this blog series, your shareholders and the board of directors must agree with any fundraising. PMV wants to know where your people stand in relation to the corona loan and will undoubtedly ask questions about this. Plus, PMV will look at how the management team performs under pressure, whether everyone is in agreement and whether someone is prepared to pivot in this crisis period.

Use of proceeds

As with every financing round, you prepare a text in which you describe what you will do with the finances collected. It is not sufficient to describe the corona loan as providing ‘oxygen until better times arrive’. No one can predict what impact corona will have or how long it will carry on. The real question and the core of your use of proceeds: what happens when the cash injection has been used up while the economic conjuncture is still unfavourable? Ideally, at that time there will be significant value added to your company, as a result of which it becomes an attractive party for a Series A or Series B investor.

Note: Your company must have its official primary address in Flanders, but there are no explicit conditions in relation to the economic impact in Flanders. Therefore, it is not a problem if you want to use the corona loan for expenses such as marketing outside Belgium.

In the next blog, you’ll learn about what happens after you’ve made your request and how to increase your chances of success.

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December 17^th 2020

Fundraising

What you need to know about the corona loan from PMV: Part 1

Is your company ready for fundraising?

In recent months, CFOrent has helped various start-ups and scale-ups request corona loans from the investment agency, PMV. In this series of blogs, we are sharing valuable insights into PMV and the corona loan.

(For general information about the corona loan, please visit the PMV website.)

How much are you eligible to borrow?

The amount you’re credited must cover your financing needs for at least 12 months. For a loan of 800,000 to 2.8 million euro, the maximum amount is 100% of the salary costs, or 12.5% of the turnover, depending on which is largest. For a loan of 800,000 euro, there are no limitations on the basis of salary costs or turnover.

Conditions for requesting a loan

You are only permitted to request the loan in one of these three scenarios:

You are only permitted to request the corona loan if your company is not in difficulty. This mean that your own equity must be on a healthy level. There is still an exception made for fledgling companies. An SME that has been established for less than three years is only considered to be an ‘undertaking in difficulty’ if a collective insolvency procedure is running against it or if it can be subject to such a procedure. Together with you, CFOrent examines which qualifications or exceptions apply to your company.
Only make an application for the loan if, at the beginning of the coronavirus crisis, you did not have any arrearson current loans, and were not behind on payments for taxes, VAT or social security.
Of the total workforce that you employed at the end of 2019, a maximum of 20% may be temporarily unemployed. You either commit to returning to an effective employment rate of at least 80% of the total workforce in a very short time span, or you arrange for at least 50% of your temporarily unemployed staff members to return to work.

Incompatibility with other financing

PMV applies a number of extra conditions:

A corona loan of more than 75,000 euro is incompatible with the nuisance premium, compensation premium, support premium and the subsidies of the New Flemish Protection Mechanism. You must pay back these premiums or subsidies if you would like to request the loan.
The corona loan may be combined with any form of current financing, except financing provided by LRM.
You pursue different corona loans, as long as the combined amounts do not exceed a total of 2.8 million euro.
Start-ups and scale-ups may only combine the corona loan with other financing if they have the same modalities as the corona loan.
SMEs and independents or self-employed persons may combine the corona loan with financing that has different modalities to the corona loan.

It is advisable to compare the various financing possibilities to each other so that you’re better able to make a well-considered choice for the most interesting option. CFOrent is happy to help you do this.

First things first: all stakeholders on board

The corona loan from PMV is not free money. For start-ups and scale-ups, this subordinated loan is convertible: PMV can convert the outstanding interest into shares at a subsequent capital round or exit, with a discount of 25% off the share price. It is likely that, sooner or later, the investment firm will come to hold shares in your company. Involve the most important shareholders for your company before you request the loan. Ask your board of directors and shareholders whether they agree. Your business can refuse the loan after PMV has authorised it, but this may inevitably damage PMV’s confidence in your business.

Impact on subsequent capital rounds

One capital round triggers the next. But are your shareholders ready to enter into Series B financing? Can you connect attractive conditions with the new shares? This is a conversation you will need to have as soon as possible. If your shareholders do not join you in a new capital round and see their interests diluted, they may decide to leave your company. This worst-case scenario may seriously damage a subsequent round and the associated value.

Also take into account that a loan is deducted from the enterprise value (the market value of your company) in a subsequent capital round.

In the next blog, you’ll learn how to prepare and submit your request.

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October 26^th 2020

Business Processes

The smart way forward with business intelligence

The data fairy tale

Once upon a time, you heard about the incredible riches hidden in your data. Vital insights into your organisation. And your financial figures. As well as your clients, products, potential risks and of course, the opportunities you have before you. The promise of untold benefits led you to collect data. Lots of data. But what comes next?

Analyse, combine, understand and decide

When it’s time to analyse your data, you’ll find it spread across different sources. A database in the cloud, Excel reports dating back years, and that customer data you need to store according to those super-sensitive privacy laws. Is all this data even relevant? It’s possible each source has something to say … But you need to extract this information. And combine it. Only then will you have the insight that gives you a clear picture of your situation and the best path forward.

The right tool for the job

The good news? There are tools that do this for you, quickly, cheaply and accurately. At the front of the pack is the Microsoft Power BI suite of tools. Power BI securely analyses data on any level, from the individual to the entire organisation, combining artificial intelligence, machine learning and natural language input abilities. Data preparation and discovery are easier than ever. And Power BI is not just for analysis; the visualisation capabilities make sure you see every little detail you need to see. You’ll never miss a thing!

No more writer’s block

Ever felt unsure about how to start a report? Google Data studio is designed to help you tell your story. It includes built-in sample reports to make it easier to put digital pen to paper. After finding, combining and analysing your data, it pours the important info into graphs or charts, geo maps or paginated data tables—whatever tells your story. The style options and different colour themes help you target the right audience.

User-friendly

Power BI and Data Studio also stand out for being wonderfully user-friendly. The reason we appreciate them at CFOrent? They don’t just make it easy for you to see the best course of action. They make it easy to show it to everyone else. And that’s a vital step whether you want to maximise your growth or minimise your risk.

Happily ever after

Do you still have doubts or questions? Maybe you’re not quite sure you’re on the right path. Perhaps you would like to have an experienced expert by your side. CFOrent is always at your service. As well as specialising in innovative business intelligence technologies, we have years of extensive hands-on experience in entrepreneurial finance. Get in touch. Let’s make your data fairy tale come true today.