Budgeting & Forecasting › Cash Budgeting
Why do lenders and investors often ask for a cash budget?
BeginnerAnswer
A cash budget demonstrates the business's ability to meet its obligations and service debt, shows when and how much financing is needed, and evidences prudent liquidity management. Lenders use it to assess repayment capacity and set facility sizes; investors use it to gauge cash sustainability.
Real-world example The bank requires a 12-month cash budget to approve an overdraft facility.