One of the largest challenges for SBA Microlenders is the fact that only 25% of your Technical Assistance Grant funding can be used for pre-loan technical assistance. As the Director of Microlending at an SBA Microloan Intermediary, I found that I was spending most of my time with clients on the pre-loan TA side, trying to help them create financial projections for their loan application.
Our microloan committee wants to see financial projections as part of the loan application from all of our borrowers, but most of our microloan borrowers do not have an accounting degree, or experience creating realistic, data-driven financial projections. In the past, I would provide the business owner with an Excel spreadsheet template to fill out that would then automatically generate financial projections, but 9 out of 10 templates came back to me incorrect.
The problem is that the average business owner does not understand concepts like:
- Cost of Goods Sold
- Loan Amortization, etc
There is no easy way to explain these concepts within the Excel template, so I found myself explaining the same concepts over and over again, which ultimately uses up all of our Pre-loan Technical Assistance hours very quickly. We figured that there had to be a better way, so we decided to create a web application called ProjectionHub.
ProjectionHub is a web-based application that helps business owners create financial projections without the need to have a PhD in spreadsheet modeling.
We have started to use ProjectionHub for all of our microloan applicants. The results have been excellent. The quality of the projections has improved, the amount of time I need to spend counseling each business owner has decreased substantially.
Why does it work?
1. We try to keep our language simple. You don’t have to be a CPA to understand what we are asking in each question.
2. We include instructional videos for the most difficult subjects. We are constantly adding new instructional videos, but we have already developed videos that explain:
- How to create sales projections
- How to calculate cost of goods sold
- How to determine depreciation