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Representative scenario
Industrial / manufacturing SME · Industrial SME · revenue €2.1 m · investment €650,000
An investment can be profitable and, at the same time, push the business into a cash crisis. Planning is there to understand not only how much it returns, but when it generates cash and how it is financed.
The financial problem
The business plan added up: the investment was profitable and the expected return justified the outlay. The point is that profitability and cash do not follow the same calendar. The outlay was immediate and concentrated, the return gradual and spread over years; with a five-year loan the instalments fell precisely in the months when the plant had not yet produced any margin. A DSCR of 0.94 means exactly this: the cash flow of the period does not cover the debt service.
The starting point
The tools we put in place
Before and after
| Indicator | Before | After |
|---|---|---|
| Minimum DSCR for the period | 0.94 | 1.35 |
| Cash low point | -€92,000 | +€108,000 |
| Loan term | 5 years | 7 years |
| Investment disbursement | in a single phase | three phases |
| Stress test on revenue and margins | not planned | rolling forecast |
The scenarios shown are for illustrative purposes and are built on recurring dynamics in SMEs. The economic figures are examples and do not represent a promise of results.
What this case teaches
Profitability and financial sustainability are two different questions, and both must be asked. A good investment can become dangerous purely because of how it was financed: changing the structure, not the investment, is often the right lever.
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Starting point, what we did and the result in three representative scenarios: cash, margins and the sustainability of an investment.
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If you recognised yourself in this starting point, the first step is always the same: an honest picture of the numbers. Write to me to arrange a first, confidential and exploratory conversation.