Back August 30, 2021

How to use cash flow forecasts to get a loan

As an entrepreneur, you’ll probably encounter some situations when you’ll have to find different solutions to pay some bills without you actually cashing in the money for it. On the other hand, maybe you want to grow your business and you’re looking for a loan or other effective ways to tackle this issue.

How can cash flow forecasts come in handy?

By definition, cash flow represents money coming in and out of your business. Lenders are often grounding their decisions on the cash flow plan as it offers lots of information about your company. For example, they can form an opinion about how much money you need on a daily or monthly basis or for how long you can keep your business up and running solely on operations. Cash flow is a clear indicator of your businesses’ financial health.

No matter the type of financing you’re looking for, cash flow predictions will be a very important part of your application.

How to use cash flow forecasts when you’re trying to get a loan

1. Start with your invoices

First of all, make sure you’re creating realistic cash flow planning. If you’re using ThinkOut, we recommend you to use the Predictions section, where you can add the inflows and outflows you know they’re going to take place.

Take into consideration how the balance of your bank account could look like in the next few months. What are you going to cash in and when? Is your business seasonal? Are there any important events that could influence your business activity? Regardless of what happens next, make sure you write down all the inflows and outflows. If you haven’t done financial planning until now, just take a look at what happened last year or in the past few months and rely on those results when you make your forecasts.

Don’t forget to update your cash flow plan once your forecasts become reality. Also, if there are other people in your company that can help you with this, don’t hesitate to make them a part of the financial planning process.

2. Find out how much money you actually need

Make sure you include in your planning the amount you want to get from your lenders. When using ThinkOut, add the reimbursement of it and see how it will look like in your cash plan — the results should tell you and your lender if you can back up this expense. In case your cash flow plan is negative, you’ll have to keep working on your planning until you manage to get to the results your desire or start looking for other financing options. Don’t forget to include interest rates and reimbursement of the credit in the same scenario.

3. Create multiple forecasting scenarios

Your creditor will want to know how your business will look like, both in the positive scenario, but especially in the negative one. He will probably pay more attention to the latter as he will always consider the highest degree of risk. If you prove that you will be able to repay the loan even in this scenario, there are chances that you will get the amount you need.

If the result of cash flow planning is a positive one, it is a good sign that your business could successfully deal with the following debts. For creditors, a positive cash flow indicates that your business is growing, given that you will have money left to reinvest. In such a situation, the cash flow forecast can help you negotiate more favorable loan conditions.

You can export your cash flow forecast in .csv or .xlsx format and attach it to the required documents when applying for a loan. This will give potential creditors a clear and easy-to-understand picture of their inflows and outflows forecasts.

Remember, no matter what your current financial situation, a well-developed cash flow plan can tell a lender that you are ready, that you have everything under control in the company, and, most importantly, that you can repay everything you owe.

Sign up for a free ThinkOut account and see how it can help you carefully plan your next inflows and outflows.

If you need more details about ThinkOut, ping us at to schedule a free demo session.

Read on about the difference between budgeting and financial forecasting, but also about why it is important to do cash flow planning.

Author: Sorina Miron