Resources

How to Use These Guides

Start with your most recent balance sheet and income statement. Work through each formula with your own figures, then repeat it for the prior year to see which way the numbers are moving. A trend often tells a lender more than a single result.

Take the Next Step

Once you understand your numbers, you can approach financing with a clear sense of how much your business can borrow and which structure fits. Use these guides as a starting point, then explore financing options that suit your cash flow and goals.

Lenders judge a business by more than its revenue. Before approving a loan or line of credit, they look at a handful of financial measures that show whether a company can carry debt, how quickly cash moves through it, and how well it handles short-term obligations.

The guides in this section explain those measures in plain terms, with formulas and worked examples you can apply to your own financial statements.

Why These Metrics Matter to Lenders

A profitable business can still run short of cash, so lenders test both earning power and liquidity. Each guide here maps to a question they ask:

• Repayment capacity. Does operating cash flow cover loan payments with room to spare?

• Cash timing. How long is money tied up in inventory and unpaid invoices?

• Liquidity. Do current assets cover the bills due within the year?

• Supplier relationships. How does the business finance its purchases, and does it pay vendors on time?

Knowing your own numbers before you apply lets you spot weak points, fix what you can, and explain the rest.

Guides in This Section

• Debt Service Coverage Ratio. How lenders measure whether cash flow covers loan payments, with worked examples for an operating business and a commercial property.

• Cash Conversion Cycle. How many days cash is tied up between paying suppliers and collecting from customers, and how to shorten it.

• How to Calculate Working Capital. The formula, a sample balance sheet, and the ratios lenders pair with it.

• Trade Credit. How supplier payment terms work, what early-payment discounts really cost, and how lenders read your payables.