This entails identifying both macro- and micro-economic factors, and
the opportunities/risks for the business in a specific market, and then
address each component with a solution to effect successful entry into
the market. This will set the strategy for the business and an outline for
the next stage which is practical planning.
This requires management to undertake a process of structured analysis
similar to that considered in this chapter.
Managers and lenders obviously have different viewpoints in how they
perceive risk and reward.
A comprehensive business plan will contain all the elements needed for
a prudent credit analysis:
■ Nature of the business.
■ Strategies for the future.
■ Industry, market and products – existing and proposed.
Management of any business irrespective of its size or nature must have
a strategy and a plan to achieve the goals of the strategy:
■ Resources – staffing, assets, organizational structure.
■ Financial performance – historic and current balance sheet, profit
and loss account, sources and uses of funds, working capital and cash-
■ Financial forecasts – Based upon the assumptions made in the bal-
ance sheet, profit and loss account, sources and uses of funds, work-
ing capital and cash-flow forecasts identifying the type and nature of
Without a longer-term view, this should raise a significant question for
the analyst about the quality of the management, its expertise and
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