When applying for a commercial loan, banks do not simply look at your top-line revenue. They evaluate your business through a strict set of risk-assessment metrics. Understanding these allows you to position your company favorably before the application process begins.
1. Debt Service Coverage Ratio (DSCR): This measures your cash flow available to pay current debt obligations. Most commercial lenders require a minimum DSCR of 1.25x.
2. Credit Utilization: Using maxed-out revolving credit is a severe red flag. Aim to keep business credit utilization strictly under 30%.