Page 32 - Beverage MasterFebMarch 2021_Update
P. 32
Craft Brewery
What the Bank will Need from You In this example, the financial pro forma shows
a summary of annual sales, margins, operating
At the heart of any good financing plan is a good expenses, net income and EBITDA. The EBITDA is
financial pro forma. This document will demon- then compared to the expected loan payment to
strate your funding needs and ability to re-pay the show the ability to re-pay the loan.
loans. Moreover, the pro forma shows your lender
that you understand what they require to approve Loan Covenants are Promises
the loan. This provides credibility for you and You Make to the Bank
makes the lender’s job easier.
The financial pro forma presents expected finan-
A typical financial pro forma will present three to cial results and demonstrates your ability to re-pay
five years of projected results. The information is the debt. In addition, the bank will require regular
presented in summary form, and shows sales, mar- financial updates to ensure the expected results are
gins, operating expenses, net income, and EBITDA being achieved. This is typically done by sending
(Earnings Before Interest, Taxes, Depreciation and monthly or quarterly financial reporting.
Amortization). The expected financial results are
then compared to the projected payments on the Further, the bank will require that loan covenants
requested loans. be met. Loan covenants are additional financial
This comparison promises that you make to the bank. Examples
establishes the include the debt service coverage ratio and the
ability to make the debt to net worth ratio.
required payments.
The debt service coverage ratio measures how
Here’s an example well cash flow covers debt payments. Here’s an
of a summary finan- example:
cial pro forma:
Image Credit: Allied Boilers
30 February - March 2021 BEVERAGE MASTER
BM020321 Main Pages copy.indd 30 1/22/21 2:31 PM
