Cash Flow is Critical to Commercial Lenders When Evaluating Loan Applications

4page_img2A commercial lenders biggest concern is that your business generates enough money to repay the loan that you are requesting. Your cash flow will tell a lender a lot about your business.

Reviewing your cash flow will tell commercial lenders how you manage your cash expenditures as they relate to your income stream. It also provides a glimpse into your market share, how well you manage the income that you have and how your business has grown in the past. All of this is critical information for which commercial lenders need to determine how well you will be able to repay the loan that you are requesting. Because cash flow if such a critical component, you might want to consider focusing on improving your cash flow prior to applying for a commercial loan. This can greatly improve your chances for getting approved for the loan.

It only makes sense to pay off any debt that you can before applying for a loan. But if you are unable to pay off a large debt then you have another option. Refinancing a large debt for a longer term will drop the monthly payments and will free up more cash each month. This increase in cash flow can help you to be able to afford a higher payment on the commercial loan that you are requesting. Another way to bolster your incoming cash is to aggressively pursue any past due receivables. Not only will this help your cash flow numbers but it will also improve your chances of getting the full payment from your customer.

If you are noticing that many of your clients are waiting to the full term of your credit allowance to pay their bills, then you might want to consider restructuring your policy. This policy change might take some time to institute, but preplanning for a commercial loan is important and this can be undertaken as you begin to explore your options for commercial lenders. With the new policy enacted, you will begin to see your cash flow increase prior to submitting your loan application.

Make Good Business Decisions

Another proactive step is to decrease your inventory prior to applying for a loan. This will reduce your expenditures and increase the cash that you have on hand each month. Along those same lines, look for ways to increase your revenue to bolster your cash flow numbers. Every company is in business to generate revenue but it can be even more important when you are getting ready to apply for a commercial loan. Additional marketing or finding a new market can greatly increase the money that you have coming in each month.

Focus On Cash

One important fact to remember is that increasing sales does not always increase the cash that you have coming in each month. You need to focus on generating business that will pay in cash or pay very quickly. Extending additional credit will not help you to improve your cash flow numbers. You need to find ways to build cash by increasing sales and operating within a new lean business model.


Dennis Dahlberg
Level 4 Funding LLC  Private Hard Money Lender
Arizona Tel:  (623) 582-4444
Texas Tel:      (512) 516-1177 NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701

About the Author:  Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.

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