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

8 February 2022

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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