Hiring a fractional CFO for a refinancing: define the assignment first

A refinancing engagement should help management compare the existing debt with a proposed replacement and understand the cash consequences of the change. Name the decision: reducing a near-term repayment, extending maturity, releasing a guarantee, funding an acquisition, or replacing a facility that no longer fits. Those objectives require different analyses and different conversations with the lender.

Give each CFO candidate the same brief. Include the current debt schedule, relevant agreements, latest financial statements, desired timing and known obstacles. Identify the person who can authorize disclosure to lenders. Ask the candidate which parts of the records must be corrected before a useful comparison can be made, and whether that accounting work is included in the fee.

The proposed analysis should show the payoff of existing debt, any contractual exit charges, new borrowing, fees, required cash contributions and the resulting payment schedule. Separate confirmed lender terms from assumptions. A lower monthly installment may reflect a longer repayment period or a larger final payment; the model should make that tradeoff visible.

Request a dated comparison under a common operating forecast. Include a case in which the transaction closes later than planned and a case in which operating cash is weaker. Ask how the analyst will check the model against the debt agreements and update it when a lender changes an offer. Keep the assumptions supplied by management distinguishable from the candidate's own calculations.

The SEC's financial-statement guide distinguishes operating results from cash movements and explains financing cash flows. Apply that distinction to the assignment: a projected reduction in interest expense and a reduction in next month's cash requirement answer different questions. The deliverable should explain both where relevant.

List the expected lender requests and assign an owner to each. The CFO might prepare forecasts, reconcile a debt schedule or explain a variance; your accountant might own the historical close, and counsel might review legal documents. Clarify who submits files, who speaks for the company and who approves a revised forecast before it leaves the business.

For U.S. SBA 7(a) borrowing, the SBA says applicants work directly with a lender and that application documents vary with the loan and processing method. Treat a candidate's standard checklist as a starting point. Confirm the actual lender's requirements before paying for a large package that may omit the schedules it wants.

A proposal that ends when a model is delivered leaves different work outstanding from one that includes closing support. Specify whether the fee covers lender revisions, meetings, final cash reconciliation, the new repayment schedule and the handoff to monthly accounting. Set a process for approving extra work if the transaction changes materially.

Ask what happens if financing is declined or management decides to stop. The company should still receive the completed analysis, underlying records, assumptions and unresolved questions under the engagement terms. Agree document ownership and access before work starts, including any licensed tools the model depends on.

Evaluate the candidate against those deliverables and relevant experience. Approval, interest rates and closing dates remain subject to the lender and the transaction. A useful proposal explains the work the adviser can control and gives management enough information to decide whether proceeding is worthwhile.