The Operating Loan
The fifth component of the Retail Forecasting Tool is the Operating Loan Forecast, a simple form that depicts the borrowing, repayments and balance of the loan, month by month, through the year.
The loan draw-downs and repayments are actually entered in the Cash Flow Forecast when it appears there will be a need or a surplus of cash at the end of each operating period. Loans and repayments are mirrored in the Operating Loan Forecast, which calculates interest, based on the loan balance at the end of each month. The Loan interest is supplied to the Operating Budget worksheet in the Financial and Admin. expenses section.
The Operating Loan worksheet is locked, except for the annual interest rate, which the user supplies.
The Operating Loan is meant to be a revolving cash facility intended to “smooth out” seasonal fluctuations in revenue. Most lenders want to see an operating loan paid down to zero at least once a year, indicating that the cash flow of the business is healthy, over the long term. Lenders become nervous when an operating loan remains at its limit over an extended period of time.