To submit a request for financing without preparation is, in practice, to guarantee a «no» from the bank. In Cape Verde, where access to corporate credit requires increasing rigour and where the Bank of Cape Verde has reinforced the credit risk for the financial system, the S&D Consultancy identifies the five structural errors that generate the most rejections and how to avoid them before submitting the dossier.
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Banks don't finance hopes, they finance numbers. Presenting linear projections, without conservative, base and optimistic scenarios, shows a lack of risk management. The credit committee first of all analyses the company's ability to generate revenue. cash enough to service the debt - the so-called Debt Service Coverage Ratio (DSCR).
A credible dossier should include at least 36 months of monthly projections, with sensitivities for change in sales (-10%, -20%) and costs of inputs. If the DSCR falls below 1.20x in the conservative scenario, the project is considered high risk.
How to avoid it: Build the financial model with three scenarios. In the scenario stress, If you need financial modelling support, show that the company can still pay interest and capital, even with a drop in revenue. If you need support with modelling, S&D Consultoria prepares financial reports and investment analyses tailored to your project.
Banks demand proof of skin in the game. If the equity is less than 20-30% of the total investment, or if its origin is not documented (transfers, savings, withholdings from previous years), the risk of rejection is high. Banks interpret low equity as a disincentive to responsible management - the problem of moral hazard.
In addition, funds of undeclared origin or without an audit trail (cash, gifts undocumented) are automatically discarded under anti-money laundering legislation.
How to avoid it: Document the origin of each equity shield. Bank transfers, declarations of withheld profits in organised accounting or valuations of assets in kind must be substantiated and reconciled.
Offer a mortgage on a property with a doubtful residual value, when the project requires it industrial pledge on productive equipment, denotes a lack of knowledge about the policy of collateral of the bank. Each type of financing requires a guarantee that reflects the nature of the asset being financed:
How to avoid it: Align the guarantee with the asset being financed. If the project involves construction, structure a mortgage. If it's an industrial expansion, propose a pledge on the capex. Include asset insurance and independent valuation by a certified entity.
SMEs in REMPE with informal records - only cash notes, no bank reconciliation, no margin calculation - they are unable to demonstrate DSCR or present a balance sheet and profit and loss account. The credit committee rejects these files for lack of transparency.
The transition to organised accounting, In this way, even before the credit application is made, it exponentially increases credibility with the bank. It makes it possible to calculate EBITDA, liquidity and profitability ratios and demonstrate financial governance.
Read also:REMPE: when to choose and when to avoid (transition guide to the general regime).
How to avoid it: Anticipate migrating to organised accounting at least 6-12 months before applying for funding. Hire an accountant to certify the records and produce financial statements with footnotes. S&D Consultancy supports you in implementing efficient processes and the organisation of pre-credit accounting.
Missing licences, pending permits or environmental non-compliance are deal-breakers. The bank checks that the situation has been regularised with the competent authorities before approving any facility. A tourism project without a tourism licence, an industrial unit without an environmental permit or a fishery without a shipowner's licence are automatically excluded.
Read also:How to set up a company in Cape Verde (step by step from registration to licensing).
How to avoid it: Before submitting the dossier, make sure you have:
| Verification | Status | Responsible |
|---|---|---|
| DSCR ≥ 1.20x in the 3 scenarios | ☐ | Financial manager / Consultancy |
| Equity ≥ 25% documented | ☐ | Partner / Accountant |
| Guarantee aligned with the financed asset | ☐ | Bank / Appraiser |
| Last 12-24 months of organised accounts | ☐ | TOC |
| Licences and permits up to date | ☐ | Compliance manager |
The financing dossier is an instrument of risk assessment, not just the presentation of intentions. Correcting these five mistakes before submission significantly increases your approval rate and can reduce the cost of your application. spread practised by the bank at 100 to 200 basis points.
If you are preparing a credit application for expansion, property investment or production project, S&D Consultancy accompanies the preparation of the complete dossier: from the business planning until the conditions are negotiated with the banks.
Book a preliminary review of your financing dossier with S&D Consultancy
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