Florida CFO Group Blog

Helpful topics from Florida CFO Group's experienced CFOs

Understanding Loan Covenants

Florida CFO Group partners Dan Polen, Joe Price, and Ginger Mentzer discuss loan covenants and their potential impact on your business.

Ginger: Loan covenants are fundamental to all commercial and business loans and protect the lender by making sure that the borrower fulfills conditions or prohibits the borrower from doing certain things over the life of the loan.

Joe: Typically, they are financial covenants but they can be non-financial in that you cannot do certain things such as acquire a business or have a significant member of the management team leave.

Dan: A negative covenant restricts a company from doing something, such as selling a portion of its assets, paying management fees to related parties, taking out cash distributions or purchasing certain assets. You may be able to get around these, but you must get the lender’s permission before you do so.

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How to Make & Keep Your Budget Relevant With Your Strategic Plan

Florida CFO Group partners Dawn Johnson, Mike Meyer, and Dan Polen discuss the importance of aligning strategic plans and annual budgets.

Mike: A lot of companies, and not just start-ups, struggle with planning and especially with aligning their annual budget and strategic plan.

Dawn: Yes, too often each is developed independently of the other without any effort to integrate them.

Dan: When this happens the annual budget is generally based on the previous year’s numbers and not on the strategic goals and objectives of the organization. I work with my clients on developing a strategic plan that creates an overview or picture for how the management team sees the company over the next three years. Then the shorter-term is managed to a one-year budget.

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