purchase or refinance of an existing car
Experienced buyers of car washes do a proforma cash flow analysis for
each purchase. When buying a car wash, or any other business
buyer and his CPA and/or car wash consultant needs to do a proforma
cash flow analysis to determine whether the cash flow under the buyer's
ownership will be satisfactory to that buyer. The proforma shows
adjustments to revenues and expenses for historical periods to arrive
at an adjusted Net Operating Income (also known as EBITDA, or Earnings
Before Interest, [Income] Taxes, Depreciation, and Amortization).
A proforma cash flow analysis is also useful when your are considering
refinancing an existing car wash..
The normal procedure begins with preparing a common-size spreadsheet of
the historical data, usually showing the financial information from the
last three years of federal income tax returns and the most recent
year-to-date period. Then the prospective buyer makes adjustments
under each of the 'actual'
columns. So, if you have four periods of financial data you'd
have four periods of revenue and expense adjustments in columns
directly under that financial data. The result is a new
(pro-forma) Net Operating Income amount for each of the four columns
(four accounting periods).
If you are buying or refinancing an existing car wash virtually all
lenders, including us, will independently do an analysis of (at least)
of car wash financial statements to determine the "normalized" cash
flow of the car wash business. We do a detailed proforma cash
flow analysis with every car wash loan to see whether the business cash
flow can comfortably repay the loan.
Lenders general require that the last three years of financial
statements be in the form of the seller's (if buying) or owner's (if
refinancing) business federal income tax returns. No bank or
finance company will accept unaudited
seller prepared financial statements in lieu of the tax returns.
If the financial results of the car wash to be
purchased/refinanced are commingled with other businesses on the
seller's/owner's tax return it is possible that the lender will accept
or "CPA Reviewed" financial statements solely of the subject car wash
business. If the financial results of the car wash that you plan
to buy/refinance are commingled with other businesses on the
sellers'/your tax returns please discuss this with us early.
For the lowest down payment lenders require that they receive the tax
returns from the seller/you that includes the car wash results whether
or not the results are commingled on the tax return with other
businesses. In many cases the lender requires that the tax
returns provided by the seller/owner be compared with the tax returns
as filed with IRS. The lenders request from IRS
the tax return transcripts using a form that we will prepare for the
Very little, if any, weight is given to verbal claims from the seller,
business broker, or real estate broker that the car wash has more
revenue and/or cash flow than is strictly shown on the tax returns.
The car wash sellers and brokers understand this. You
should be wary of any claims that the car wash is making more
money than is shown on the tax returns, or
on CPA Reviewed or CPA Audited financial statements. It is also
wise to make sure that all EXPENSES have been reported and are
reasonable for the subject car wash.
Below, we provide an easy-to-use Proforma Cash Flow Analysis software
applicants (you) to do the proforma cash flow analysis. Like
projections software, you can use the Proforma software to create a
of "what if?" scenarios, such as "Best Case", "Expected Case", and
Case". We compare our Proforma to the one prepared by you to make
that we understand the situation as you do.
For those people investigating the purchase of a specific car wash and
who have the historical financial data please feel free to use the
following Excel workbook. This is an easy-to-use pre-formatted
proforma cash flow analysis
template. It is in Excel. Everything is already set
up. All that you have to do is enter the car wash name, the
ending date of each accounting period, fill in the historical revenue
and expense dollar amounts, then make your adjustments. The
addition and subtraction is done for you. The template is
easy to use. If you have any questions on this, please call us.