As part of this three part series designed to provide guidance to club directors on how to obtain financing for their volleyball facility, I’d like to welcome you to “Getting Your House In Order.” As a former commercial banker, it is my hope that I can share actionable guidance with you that will help you ultimately obtain financing and do so in a much shorter period of time. Banks speak a certain language as explained in “Speaking the Language of the Banks”, Part 2 of 3, Obtaining Financing For Your Volleyball Facility because they are heavily regulated and monitored and the ability to speak this language is essential.
I’m hearing more and more that clubs are challenged with space to be able to grow into. This would include space to house tryouts and practice as well as space to be able to play games and host tournaments. Many club directors are sick of renting overpriced space that doesn’t really meet their needs and want a space of their own where they can expand their club and have more control over their own destiny.
However, getting your own space is a journey and requires an insane amount of planning and time. A club director has to be prepared for that journey, but can feel optimistic that with the right information they can turn what might be a two year journey into a 3-6 month, well thought out exercise.
The first step in that exercise is making sure you have your house in order from a financial and bookkeeping perspective. There are many aspects to this, but this should provide a good overview of the most important ones.
Have A Solid Business Model
Clearly, everything starts with a solid business model built around running the club profitably and with clarity into how the club is run overall. Doing some basic projections to make sure you are charging the right amount for registration, travel, camps and clinics and rentals is key. Further, being able to efficiently measure those things is mission critical and ideally through separate profit and loss financial statements.
Financial statements is perhaps the best place to start in getting your financial house in order. Financial statements are the book that a bank or financial institution reads from. If that book reads well, tells the right story and is accurate, a club director should have no problem obtaining financing from a bank. Typically, a bank wants to see at least 2 years of historical financial statements from previous years in addition to “interim” statements for the current year. That’s not to say that a loan cannot be obtained with less than two years of financial statements, but it sure makes the process easier.
CPA Reviewed Statements
In keeping the theme of financial statements being the book that a bank reads from, it’s important to have some third-party validation in place. In contrast to “company prepared” financials statements, it’s important to have a well known and trusted CPA or accounting firm take your company prepared statements, validate their accuracy and provide a compiled or reviewed statement (those different levels just represent the level of detail and validation a firm has gone into). Cost for that type of validation can range from a few hundred to a few thousand dollars, but it’s well worth the money.
Determining The Right Legal and Tax Structure
Most CPA or accounting firms will know exactly what you need, but so that you are completely prepared it’s important to understand whether you need a non-profit or for-profit type of entity. This will be based on the exact or anticipated objectives of a club and is important to have buttoned up prior to talking to a bank. A good CPA in your local area can help you evaluate your objectives and determine the best path forward to the extent you haven’t already taken care of these types of things.
Taxes Paid (Payroll, State and/or Federal) Returns Filed
It probably goes without saying, but make sure all your taxes have been paid and your returns (990’s or 1120’s) have been filed on time. Not properly accruing or paying your taxes and further, not filing your returns accurately and on time is a deal killer. Any CPA or accounting firm worth their salt can definitely help provide guidance and even take care of preparation and filing for you. Don’t skip this step and make sure and hire reputable people and firms to represent you.
Contracts, Waiver and Liability Management
In most cases, a club director needs to be able to communicate that proper policies and procedures are in place and being closely followed and documented. This will give a bank some comfort that their loan is protected and they will get paid back. This would include contracts with vendors and parents along with proper (state specific) waivers and liability release forms in place. Contracts and liability waivers are especially critical in youth sports because of the high rate of uncollected funds. Banks want to see that a club director has taken every precaution against uncollected funds and any liability that exists at the club level against injuries incurred at the facility or at a tournament.
About The Author
Allan is the father of three boys who are big time travel lacrosse players. As a father and CEO of PaidUp, he totally gets what club directors and parents face every day as we try to provide the best for our children. Allan is also a recovering banker so he grew up (professionally speaking) helping small businesses thrive! Don’t hesitate to pick his brain how to run a great club! Allan can be reached directly at email@example.com you can schedule a time to connect by clicking here: https://paidup.as.me/.