Nearly every company eventually needs outside financing if it is to grow. But it is no easy task to negotiate a bank loan, win over a financial partner or persuade a new shareholder to take a stake in the capital.

Financing negotiations will be more productive if you are prepared with the KPIs that your banker or your investors need to see. They will help them evaluate your track record and your ability to achieve your future objectives.  n this article, we explain the Key Performance Indicators (KPIs) that you should share during financing negotiations.

Overall, you should present financial information that shows how you’ve performed in the past and a multi-year financing plan forecasting how you intend to operate in the future. This will provide prospective partners with evidence of your sound financial management, both in the past and looking ahead.

The plan should be succinct so that partners can understand your business and goals in a few minutes, but you should also include back-up information in case they want to know more on a specific point.

Tip: Be proactive by proposing an annual meeting to present your balance sheet, and/or suggesting regular meetings. The relationship of trust with your banker or your investors is fundamental. 

Revenues, profit, cash flow, equity and debt are all specific quantitative indicators that must be provided to your talking partner. But you should also include a table containing forecasts for the company’s assets and liabilities. Your banker or potential investors need to assess how the KPIs have progressed in the past few quarters and how you anticipate they will change in the future.

Cash flow and business liquidity ratios indicate your company's ability to meet its repayment schedules. The immediate cash flow (or liquidity) ratio should be greater than 1, which means that your company has sufficient cash to meet its short-term repayments. In the longer term, use the current ratio. Again, it should be greater than 1.

How to calculate the immediate cash ratio: Immediate cash ratio = cash/short-term debt

How to calculate the current ratio: General liquidity = current assets / current liabilities