Restaurant business loans are tough to qualify for because lenders perceive the restaurant industry as volatile. Loans backed by the Small Business Administration (SBA) make it so lenders are more willing to issue these loans to buy a restaurant, open a new location or obtain working capital. SBA loans have rates between 5 percent to…
All Financing Articles - Page 26
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How to Get SBA Startup Loans in 7 Steps
SBA startup loans are the same as traditional SBA 7a loans for existing businesses but are more difficult to qualify for because there is a higher risk of default. These loans are still possible but you’ll typically be required by SBA lenders to come up with 25 – 30% as a down payment as well…
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Debt to Income Ratio: How to Calculate & DTI Formula
The debt to income (DTI) ratio measures the percentage of your monthly debt payments to your monthly gross income. For example, if your monthly debt payments are $3,000 and your monthly gross income is $10,000, your DTI ratio is 30%. Lenders check this during the application process and typically require a DTI of 43-50% or…
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Collateral Coverage Ratio: What it is, Formula, & How to Calculate
The collateral coverage ratio represents the percentage of a loan secured by a discounted asset and is used by lenders to set maximum loan limits. For example, mortgage lenders typically value property at a discounted rate of 80% of fair market value (FMV) and offer loans with a minimum collateral coverage ratio of one, or…
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Cross Collateralization: What it is & Why it’s Important
Cross Collateralization typically occurs when one asset is used as collateral for two or more loans. It also occurs when a borrower uses a group of assets to secure a group of seemingly unrelated loans. This commonly happens when someone has multiple loans at a single bank that uses the combined assets as collateral for…
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What Are Current Assets: Formula & How to Calculate
Current assets are balance sheet assets that can be converted to cash within one year or less. Accounts that are considered current assets include cash and cash equivalents, marketable securities, accounts receivable, inventory, prepaid expenses, and other liquid assets. These short-term assets are a key component of a company’s net working capital and short-term liquidity….
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What Is Fixed Charge Coverage Ratio: How to Calculate & FCCR Formula
The Fixed Charge Coverage Ratio (FCCR) indicates a firm’s ability to pay its fixed charge obligations (expenses) from its income before interest and taxes. It determines the extent to which recurring charges consume the company’s cash flow. The ratio derived from the computation is the number of times a firm can cover its fixed expenses…
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What is Asset Turnover Ratio: How to Calculate & Formula
The asset turnover ratio is the percentage of a company’s revenue to the value of its average total short- and long-term assets. It measures how efficient a company is at using its assets to generate revenue. For example, if your net sales are $20,000 and average total assets are $12,000, then your asset turnover ratio…
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What Is Net Working Capital: How to Calculator & NWC Formula
Net working capital (NWC) is the difference between a company’s current assets and current liabilities. A positive net working capital indicates a company has sufficient funds to meet its current financial obligations and invest in other activities. For example, if current assets are $85,000 and current liabilities are $40,000, the NWC is $45,000. Net Working…
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How to Offer Power Tool Financing at Your Hardware Store
Power tool financing is offered by hardware stores to help consumers buy upgraded tools or add high-margin accessories to their purchases for large home projects. Customer financing is important to offer because the larger chains you compete with have their own financing programs. Financing can increase the number of purchases made and the average order…
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What Is A Small Business?
A small business is a privately owned company in the legal form of a corporation, partnership, or sole proprietorship. The SBA defines a small business as one that typically makes a maximum of $750,000 – $38.5 million in annual revenue and has less than 100 – 1,500 employees, depending on industry. A majority of businesses…
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What are Current Liabilities: How to Calculate & Formula
Current liabilities, also known as short-term liabilities, are the summation of a company’s debts, financial obligations, and accrued expenses that appear on its balance sheet and are due within twelve months. Examples of current liabilities include accounts payable, short-term loans, accrued expenses, taxes payable, unearned revenues, and current portions of long-term debt. Current Liabilities Formula…
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