Cash-flow model secures a €450,000 loan for a food wholesaler

Situation

A regional food wholesaler in Frankfurt-Bockenheim, 22 staff, about €6.2 million revenue a year, supplies restaurants and canteens across Rhein-Main. The owner wanted to build a cold-storage extension and buy two refrigerated vans, about €520,000 in total. €70,000 would come from cash, and she applied to her house bank for a €450,000 loan over seven years.

The bank asked for a monthly liquidity plan covering 24 months. The only forward numbers were an annual budget in a spreadsheet with hard-coded totals. Nobody could show the bank what happens to cash when the extension is half built and the Christmas stock must be paid for at the same time.

Approach

We built a monthly, 24-month cash-flow model in Excel. A cash-flow model is a forward picture of money in and money out, month by month, showing when the bank account is at its lowest.

Every assumption sits on one input sheet and can be changed: sales by customer group, margins, payment terms, wages, rent, the build schedule, the van delivery date, and the loan terms. Every other number in the workbook is a formula that follows from those inputs.

The model links a profit-and-loss statement (what the firm earns), a balance sheet (what it owns and owes), and the cash flow. The bank’s main check is debt-service coverage, which means the cash the business generates in a year divided by what it must pay the bank in that year. A sensitivity table shows that ratio if sales fall by 5, 10 or 15 percent.

We worked from three years of accounts and the builder’s quotation. The tax adviser (Steuerberater) reviewed the tax lines and the depreciation. Nothing in the model is tax or legal advice.

Result

In this scenario EBITDA, meaning earnings before interest, tax and depreciation, was about €330,000 a year. After tax, the existing vehicle leases and the ordinary replacement of equipment, about €160,000 a year was available for the new loan, against yearly payments of about €78,000. That is a coverage of about 2.0 times in the base case, well above the 1.2 to 1.3 most house banks want. The model also showed what the budget had hidden: cash would dip to about €85,000 in month six, when the build payments and the pre-Christmas stock coincided. The owner moved one build instalment by six weeks, which lifted the low point to about €130,000.

The application went to the credit committee with the model and a two-page narrative. The bank approved the €450,000 loan five weeks after submission. The owner now updates the input sheet monthly and steers from the same file.

What it cost

The engagement cost €5,850 as a fixed price, quoted before the work started. That bought the 24-month model with its single input sheet, the coverage tests, the sensitivity table, and a one-hour walk-through so the owner could run it herself. Delivery took three weeks. The work is covered by our 100% money-back guarantee: full refund on request within 14 days of delivery.

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