Commercial Debt and Working Capital
Business loans fund expansion, inventory acquisition, equipment purchases, or commercial real estate.
Unlike personal credit which primarily looks at consumer credit scores, commercial underwriters evaluate
cash flow health, historical balance sheets, and most importantly, your
Debt Service Coverage Ratio (DSCR).
The Debt Service Coverage Ratio (DSCR)
DSCR = Net Operating Income (NOI) ÷ Annual Principal & Interest Debt Service
- DSCR ≥ 1.35x (Strong): Robust cash buffer. Most commercial banks and SBA lenders readily approve.
- DSCR 1.15x – 1.34x (Acceptable): Satisfactory coverage, though lenders may request personal guarantees or collateral.
- DSCR < 1.15x (Vulnerable): High risk of default if revenues decline or operational costs rise.
Common Commercial Loan Types
SBA 7(a) Loans
Government-backed loans offering up to $5M with competitive rates and terms up to 10–25 years.
Bank Term Loans
Traditional fixed or variable rate bank financing for established businesses with 2+ years of tax returns.
Equipment Financing
Secured directly by the machinery or vehicle being acquired, often requiring minimal cash down.