Projections are Critical in 2021!

Dec 22, 2020 by Roger Scherping

It’s clear that there has never been a year like 2020. I remember the Great Recession of 2007 to 2009 as a terrible time for business, but even the Great Recession did not generate the large number of small business failures, the extensive unemployment, or the widespread disruption in everything from consumer goods supply to our daily commute-based work lives that the pandemic has caused.

Shawn Gardner, a commercial banker at BNC Bank in Minneapolis, told me recently that the pandemic is going to have a significant impact on banks and borrowers in 2021. Most businesses suffered in 2020. That’s no surprise. Shawn said that here at the end of 2020, a large number of small business borrowers have fallen behind on their payments or have failed to meet their loan covenants, and this puts these small business loans in danger of being reclassified as “troubled” or in need of restructuring.

What happens in 2021?

Shawn said bank regulators understand about 2020, and they are willing to give small businesses a “pass” on 2020 because of the unanticipated impact of the pandemic. The regulators are willing to look past 2020 under two conditions. First, the small business needs to be able to clearly explain the financial impact that the pandemic had on their business in 2020. And second, they need to demonstrate how they will survive in 2021 by providing a projection for the next 12 months.

Most small businesses don’t routinely do financial projections or even a simple budget. Most small business get comfortable with the size they are at, and as long as they are able to make their weekly payroll, they don’t give a lot of thought to the numbers of their business.

Shawn said that will change in 2021. He said that projections have not been this important since 2008.

The importance of projections

Shawn is using ProjectionSmart Growth with some of his clients that had difficult years in 2020. He is working with them on their 2021 projections which will show the bank and its regulators what the companies’ plans are to survive in 2021.

Shawn said that his clients have found Growth very easy to use, and the financial statements that Growth provides are exactly what the bank and its regulators are asking for.

So this may be the year that you are forced to a projection for your business. If so, I hope ProjectionSmart Growth can give you what your bank needs. But more than that, I hope that you learn the value in seeing your financial future! Continue to do financial projections, even after you satisfy your bank! Gain the benefit of always understanding where your business will be in the next 12 months, and enjoy the peace of mind that comes from that knowledge.

Another reason to do projections

Or maybe you’re not one of those small businesses that is comfortable with where you’re at. Maybe you have growth plans. Do you understand what it will take financially to reach those goals? Growing businesses require money for equipment, people, and working capital. Do you know how much money you will need to reach your goal? ProjectionSmart Growth allows you to model three different scenarios so that you can consider several different growth scenarios. One of Growth’s greatest strengths is that it will help you understand the financial impact of your business decisions. No more guessing on those big decisions!

Let me know if we can help.