Company’s Length of Existence
Lenders are much more likely to approve you if you have a long history in business. It is easy to look at but has huge implications on what you can get. This is why many new companies and startups have to go to lenders other than banks. It makes sense. The newer a company is, the bigger the risk is for the lender. If your company has been around for decades, there is a proven record of success that translates to being able to pay off the loan. Companies that are two years old and older have a much better chance of qualifying for a specific loan they want. A lender may also look at your previous business experience in running a company to help your personal track record.
Your Cash Assets and Yearly Income
You need to be able to prove you have cash flow to pay off the loan, and comfortably. The lender will want to look at your cash income and your debt, which is called your debt service coverage ratio (DSCR). This will show your income compared with your payments, how much cash you have on hand. It works like this. If your income is $600,000 a month, and your loan payment will be $100,000 a month, your DSCR is 6. That is very good. Anything over 1 proves you can make loan payments, but the lender will look for companies with a number higher than 1.
The minimum is usually a DSCR of 1.2.
A Sound Business Plan Helps
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