Modelling business change in a pandemic

Nobody knows the length or depth of the economic fallout from the Covid-19 pandemic. Many businesses will be looking at bank loans to tide them over this period - and possibly for the medium to longer term.

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Philip Quigley, Roland Brook
Published: 03 Apr 2020 Updated: 13 Apr 2023

Nobody knows the length or depth of the economic fallout from the Covid-19 pandemic. Many businesses will be looking at bank loans to tide them over this period - and possibly for the medium to longer term. Banks will be expecting loan applications to be supported by robust business plans and well-prepared financial models.

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Borrowing requirements

The UK Government has announced various schemes to support businesses, employees and the self-employed, but it is likely to take time before this cash can be tapped. Many businesses are seeking loan finance to bridge the gap.

Loans up to £5m are available using the Coronavirus Business Interruption Loan Scheme (CIBLS) for most businesses with a turnover less than £45m. Lenders are incentivised by the Government, which has agreed to guarantee up to 80% of the loan drawdown. To be able to access the scheme the business must be viable barring COVID-19 issues. It could be that bank loans outside of the scheme could be more appropriate.

Inside or outside of the scheme, the lender must be persuaded that the provision of finance will enable the business to trade out of any short-to-medium term difficulty. Such decisions can usually only be made when supported by a coherent and adaptable business plan.

Projections models

A reliable projections model is one of the most important elements for a successful business plan.

Many existing projections models have evolved over time without any well-structured design, integrity checks, or documentation, or are difficult to adapt readily to reflect changing requirements. These models may have flaws that could undermine the credibility of the overall business plan or loan application.

More than at any time in recent history there is a need for business managers, audit committees and boards to have access to a robust, fully integrated financial model. This model should highlight the cash position and funding requirements and be quickly adjusted to address a rapidly changing business, economic or regulatory environment. It should also provide clear assurance on overall business resilience.

The principles of building a credible projections model remain the same whether in or beyond the pandemic. These include:

  • a focus on the key business drivers
  • reliable input data
  • transparency regarding inputs, calculations and outputs
  • outputs derived from arithmetically correct calculations
  • a model which can quickly assess a range of potential scenarios.
We have produced an interactive guide to help you work out if the Coronavirus Business Interruption Loan Scheme is an option for your business View guide

How we can help

We have a team of qualified accountants experienced across a range of sectors who can help develop fully integrated projections models. These models are designed to be robust and flexible, and to meet the needs of different users whether business management, lenders or other business partners. The short-term focus may be cash requirements, but then a longer-term focus on overall business profitability.

Our models are developed in accordance with the Twenty Principles for Good Spreadsheet Practice published by the Institute of Chartered Accountants in England and Wales.

We also perform independent reviews on the integrity of an existing model to provide you and other users the assurance that it is operating effectively. We have previously reported to Boards, lenders, regulators and the devolved Governments.

Please contact:

Philip Quigley
Partner, Head of Transaction Services

Roland Brook
Associate Director, Transaction Services


This article was previously published on Smith & Williamson prior to the launch of Evelyn Partners.