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Compare portfolio quality, operating sustainability and short-term cash coverage at a US mission-based business lender. Work from loan, expense and cash exports with explicit definitions and checks that reconcile branch results.
Microfinance ratio analysis tests whether a business lender is maintaining a sound loan portfolio, covering its operating costs and retaining enough available cash. Use the same reporting date for loan balances and a clearly defined period for income and expenses. A healthy result in one area does not cancel a weakness in another.
For a US reader, the practical setting is a mission-based small-business lender. The SBA describes its microloan intermediaries as nonprofit community-based organizations. The CDFI Fund's certification requirements include a community-development mission, financing activities and service to a target market. These are related settings, but an organization should not assume that every mission lender has the same program or reporting requirements.
Use a loan register with loan ID, branch, outstanding principal, days past due and restructuring status. Add a quarterly income-and-expense file by branch and a cash schedule that separates unrestricted money from restricted funds. Use internal identifiers rather than borrower names in the review file.
Document the definitions before calculating. Here, portfolio at risk means outstanding principal on loans more than 30 days past due, abbreviated PAR >30. Restructured loans require a separate flag and an explicit inclusion policy. The worked portfolio contains no restructured loans.
For operating sustainability, use earned lending revenue and the associated financing expense, loan-loss provision and operating expense. Exclude grant income. This is an operating review, rather than a reconstruction of the organization's complete financial statements; the broader financial ratios guide covers other statement relationships.
PAR >30 = Outstanding principal on loans more than 30 days past due / Gross outstanding loan principal
The CGAP financial definitions guidance distinguishes portfolio at risk from overdue installments: the numerator includes the full outstanding principal of affected loans. It also calls for disclosing the threshold and treatment of restructured loans. This is useful measurement guidance, not a substitute for US accounting or program requirements.
Consider a fictional Ohio business lender at September 30, 2026. The following compact sheet groups loans with the same branch and delinquency status; the formula also works on each underlying loan. Outstanding principal is gross of the allowance for credit losses.
| Branch | Loan group | Principal (USD) | Days past due | At-risk principal (USD) |
|---|---|---|---|---|
| Cleveland | Current | 180,000 | 0 | 0 |
| Cleveland | Late | 40,000 | 45 | 40,000 |
| Cleveland | Recently overdue | 80,000 | 20 | 0 |
| Dayton | Current | 170,000 | 0 | 0 |
| Dayton | Late | 30,000 | 65 | 30,000 |
| Total | 500,000 | 70,000 |
With these columns in A through E and the header in row 1, enter in E2 and fill through E6:
=IF(D2>30,C2,0)
The company calculation is:
=SUM(E2:E6)/SUM(C2:C6)
That gives 70,000 / 500,000 = 14.00%. Format ratios as percentages; displayed percentages here are rounded to two decimal places after calculation.
| Branch | Gross principal (USD) | At-risk principal (USD) | PAR >30 |
|---|---|---|---|
| Cleveland | 300,000 | 40,000 | 13.33% |
| Dayton | 200,000 | 30,000 | 15.00% |
| Total | 500,000 | 70,000 | 14.00% |
For Cleveland, the branch formula is:
=SUMIF(A2:A6,"Cleveland",E2:E6)/SUMIF(A2:A6,"Cleveland",C2:C6)
Use outstanding balances to weight the result. The count-weighted and value-weighted guide explains why the share of delinquent loans by count answers a different question.
Operational self-sufficiency = Operating revenue / (Financing expense + Loan-loss provision expense + Operating expense)
Use the same quarter for every expense and revenue line. The provision is an expense for expected losses; it is distinct from both the allowance balance and principal written off. The CGAP guidance also sets out this operational self-sufficiency definition.
The lender's prepared third-quarter schedule is:
| Branch | Revenue (USD) | Financing expense (USD) | Loss provision (USD) | Operating expense (USD) | Total expense (USD) | Self-sufficiency |
|---|---|---|---|---|---|---|
| Cleveland | 8,100 | 1,200 | 1,800 | 6,000 | 9,000 | 90.00% |
| Dayton | 9,900 | 1,000 | 1,000 | 7,000 | 9,000 | 110.00% |
| Total | 18,000 | 2,200 | 2,800 | 13,000 | 18,000 | 100.00% |
On a separate worksheet with these headers in row 1, total expense in F2 is =SUM(C2:E2), and self-sufficiency in G2 is:
=B2/F2
Cleveland's revenue falls $900 short of its expense base; Dayton contributes a $900 surplus. Together they break even on this definition. That does not establish long-term viability: the branches may differ in loan mix, assistance obligations or shared-cost allocations. General operating ratio analysis measures costs against sales; lending needs the explicit financing and provision boundary used here.
Use an internal planning measure: unrestricted cash divided by committed cash outflows over the next 30 days. It is neither a regulatory liquidity ratio nor the current ratio. Include scheduled funding repayments, operating payments and committed loan disbursements in the outflow schedule, without counting the same obligation twice.
| Branch | Available cash (USD) | Committed outflows (USD) | Cash coverage |
|---|---|---|---|
| Cleveland | 12,000 | 20,000 | 0.60x |
| Dayton | 18,000 | 25,000 | 0.72x |
| Total | 30,000 | 45,000 | 0.67x |
For cash in B2 and outflows in C2, use =B2/C2. Retain full precision in the workbook and display two decimals. The consolidated shortfall is 45,000 - 30,000 = $15,000 before any additional available funding or collections. Do not transfer one branch's restricted cash simply to make another branch's coverage look adequate.
The loan register must sum to $500,000 of gross principal in the lending subledger. Reconcile the allowance separately to reach the net ledger balance. The expense schedule must sum to $18,000, and its branch allocations must not duplicate central costs. The available-cash schedule must tie to reconciled cash balances after restrictions.
Finance owns those reconciliations. Lending operations owns delinquency and restructuring flags; treasury owns the dated cash commitments. Management can then investigate Dayton's higher portfolio risk, Cleveland's revenue shortfall and the company cash gap as separate questions. Broader credit ratio analysis belongs alongside this review rather than being replaced by one headline score.
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See Covirage for commercial banking teams for the business-file approach.
No. Portfolio at risk uses the entire outstanding principal of a loan that crosses the specified delinquency threshold. An overdue-installment total includes only payments already due. The measures answer different questions and should have different labels in a lending review.
For the lending-operations measure used here, grant income is excluded. Show grants separately so management can distinguish earned revenue coverage from subsidy support. Include the costs of the activities being assessed, with a consistent allocation of shared expenses.
Branches need the same reporting date, delinquency threshold, loan treatment and expense allocation policy. A branch serving smaller loans or providing more technical assistance may have higher costs for a legitimate reason. Explain those differences before ranking its performance.
These measures support a lender's operating review. They do not replace borrower underwriting, a lending policy, applicable legal requirements or a credit decision. Portfolio totals describe existing exposure and financial capacity rather than an applicant's individual ability to repay.