Store-It-Cheap: A Financial Model for a Business Loan Application
Wiseworth Financial Modelling and Advisory built a financial model for Store-It-Cheap, a self-storage company that needed finance to move to a larger site. The model forecast the cash flows of the land purchase and the subsequent expansion of capacity and revenue, which sized and shaped the debt required and gave the lending bank the comfort it needed. The result was a successful lending arrangement, land purchase and growth in the business.
FAST FACTS
Client: Store-It-Cheap
Location: Melbourne, Victoria
Services: Forecasting, scenario analysis, capital raising through debt financing
Model purpose: Business loan application
Outcome: Successful lending arrangement, land purchase and business growth
Website: storeitcheap.com.au
ABOUT THE CLIENT
Store-It-Cheap is a self-storage company operating in Melbourne.
THE CHALLENGE
Store-It-Cheap needed finance to expand and move to a larger site. That meant two linked decisions rather than one: buying land, and then building capacity and revenue on it over time.
A loan application of this kind has to answer questions the business could not yet answer from its existing reporting. How much debt does the expansion actually require? How does the cash flow behave across the purchase and the build-out, before the new capacity starts earning? And what happens to the repayment picture if the assumptions underneath it move?
WHAT WISEWORTH BUILT
Wiseworth built a financial model that forecast the cash flows of the land purchase and the subsequent expansion of capacity and revenue.
The model was built to size and shape the required debt, rather than to present a single fixed forecast. Mark Jeanes challenged and tested the important assumptions with the business before they went into the model, and built a level of scenario analysis on top of them so the repayment picture could be examined under different conditions.
That structure served the lender as much as the borrower. A bank assessing a loan application wants to see the assumptions stated, tested and traceable, not a set of confident numbers with no working behind them.
THE RESULT
The model provided the comfort the lending bank needed. The result was a successful lending arrangement, land purchase and growth in the business.
Store it Cheap recently sold half of its landholdings (purchased via the above lending deal) for $15m, nearly seven times the purchase value.
IN THE CLIENT'S WORDS
"I engaged Mark to build a financial model for a business loan application. I could not have been happier with his work and would have no hesitation in recommending him.
He has a great grasp on complex aspects of finance and accounting. He is thorough and has excellent attention to detail. He challenged and tested important assumptions and built a sophisticated level of scenario analysis.
He does what he says he is going to do, when he says he's going to do it."
Simon Vergers, Chief Executive Officer, Store-It-Cheap
FREQUENTLY ASKED QUESTIONS
What does a bank want to see in a financial model for a loan application?
A lender wants the assumptions behind the forecast stated plainly, tested, and traceable through to the cash flow. Scenario analysis matters because the bank is assessing repayment capacity under conditions that differ from the base case, not only under it.
What is debt sizing?
Debt sizing works out how much a business can borrow and service, based on forecast cash flows. The model shapes the facility around what the cash flow will actually support across the term.
Can a financial model forecast a property purchase and an operational expansion together?
Yes. The Store-It-Cheap model forecast the cash flows of the land purchase and the subsequent expansion of capacity and revenue as one connected picture, which is what the lender needed to see.
Do I need a financial model to apply for a business loan?
Not every application requires one. A model becomes necessary when the borrowing is tied to an expansion or an asset purchase, where the repayment case rests on future cash flows rather than on the existing trading position.
Who builds the model?
Mark Jeanes builds every Wiseworth model personally, from the first assumptions sheet to the last balance check. He spent 20 years at NAB, ANZ, Banque Paribas and Deutsche Bank before founding Wiseworth.
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Call: +61 449 502 425 | Email: contact@wiseworth.com.au