Cash Flow is King

Business owners often stress prior to submitting a request for new equipment financing. By the time we get an application we hear about all the things that has kept them up at night; personal credit score, business credit, seasonal or market slowdowns, lawsuits and ownership changes are among some of their concerns. All of these are valid reasons why an application may get declined but the key item which lenders look at is cash flow; how much money is running through the business account each month.

Cash flow is important because it determines whether a new debt can be paid for or not. Credit scores determines character, at least in the eyes of underwriting folks; sometimes you have the ability to pay but because of poor time management, priorities, lack of discipline or plain bad luck; you don’t pay bills on time or at all. The intention to pay is good but we encounter situations where divorce, medical illness or partner upheavals can cause bills and debt to go unpaid. Good explanations can help support a poor credit history and if bills are being managed properly within the last few months then a finance approval is possible but if cash flow isn’t there then a decline is sure to come.

Cash flow is the ability to pay; it’s measured from your business checking account, financial statements and tax returns; after all non-cash deductions are added back in the credit analyst will determine how much actual cash is available to service any new debt. Without adequate cash flow, a good credit score, long time in business or a growing market is unlikely to help get you approved. Cash is king in debt financing where the main collateral is the new piece of equipment you want to finance. Your accountant, bookkeeper or CPA can help determine available cash and with a monthly payment estimate which we can quickly provide you can determine if a finance approval is likely.