Capacity Cash Flow

In this episode of Bank on Banking, Kevin Bank breaks down the second of the Five C’s of Credit: Capacity. Capacity is really about one question: Does your business generate enough cash flow to repay the loan? You can have great credit, valuable collateral, and a successful business—but if the cash flow does not support the debt, getting a bank loan can be difficult. In this episode, we discuss what bankers actually look at when evaluating capacity, including: • Cash flow and profitability • Existing debt payments • Debt Service Coverage Ratio (DSCR) • Historical results versus projections • One-time expenses and unusual income • Working capital needs • Personal and global cash flow • Why taxable income and cash flow are not always the same thing Most business owners focus on how much their company makes. A banker also wants to know how much cash is left after expenses and existing obligations—and whether there is enough left to comfortably make the proposed loan payment. Understanding how a banker analyzes cash flow can help you prepare before you ever apply for financing. Bank on Banking explains commercial lending from the other side of the desk. Subscribe for upcoming episodes covering the remaining Five C’s of Credit and other topics involving business loans, SBA financing, banks, credit, and how lending decisions are actually made. Learn more at BizMedica.com/Bank-on-Banking #BankOnBanking #BusinessLoans #CashFlow #BusinessCredit #CommercialLending #SmallBusiness #Entrepreneur #Banking #BusinessFinance #FiveCsOfCredit