Co-hosted by Anthem and People’s Bank, here’s what every business owner should know before walking into a bank.
It’s not about revenue. It’s about readiness.
The seminar opened with a provocative truth: revenue doesn’t get deals approved. Banks aren’t just asking how much you make. They’re asking whether your business can reliably service debt. That distinction changes everything about how you prepare.
Banks follow the cash, not the revenue
Lenders focus on cash flow and the cleanliness of your financials, not top-line numbers. The single most important metric they evaluate is your Debt Service Coverage Ratio (DSCR). The formula is simple: divide your cash flow (EBITDA) by your total debt service. Banks want to see a result of 1.25 or higher. EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization, and it’s the measure of cash flow lenders actually use.
Common reasons businesses get denied
Even profitable businesses get declined or limited. The most common culprits are:
- Messy or outdated financials
- No forward-looking forecasts
- An overleveraged balance sheet
- Tax strategies that reduce lendable income
- Excessive personal distributions
Your tax advisor and your lender may have conflicting goals
Minimizing taxable income is a common tax strategy, but it can also minimize your lendable income. Talk to your advisor before your next filing to align your tax approach with your borrowing goals. These two objectives aren’t always at odds, but they need to be deliberately coordinated.
How to become bank-ready before you need it
The best time to prepare for a loan is long before you need one.
- Start with monthly financial visibility so you always know your numbers.
- Build a cash flow forecast covering the next 6 to 12 months
- Make strategic borrowing decisions proactively rather than reactively
- Track your KPIs and key management reports consistently.
Three things you can do this week
- Review your most recent financials and confirm they are current and clean
- Calculate your Debt Service Coverage Ratio to see where you stand
- Schedule a consultative review with your bank relationship manager
Get the full recording of Get Funded | HERE
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