Video Guides To Using Financial Ratios
There are many ratios used by lenders to measure affordability or suitability of finance. Many lenders will measure affordability based on a set ratio, if your company fails that ratio then suddenly it becomes much harder to secure borrowing.
What many lenders lack is an ability to explain the different ratios, even less to share them with you. Sussex Business Finance is about being on your side, so we have compiled the various ratios and provided an explanation of how to use them.
As always, if you have any questions then please do get in touch.
Debt Service Coverage Ratio
Debt Service Coverage Ratio, or DSCR looks at the capacity a business has to meet it’s loan commitments. The DSCR ratio looks at net profit then adds back in non-cash and costs no longer applicable, it then compares that figure to the new loan costs. There are key things a lender does when working this ratio which are explained in the video.
You can download a DSCR spreadsheet here below;
Common Financial Ratios
This short video covers the common ratios used by commercial lenders in the SME space. The idea is to give you an understanding of what a lender is looking at so you can prepare and measure for yourself in advance. By understanding the commonly used ratios you can start to explain why your business is different from the norm, why a certain ratio may be different from what is standard. There are normally good reasons why a certain ratio differs in your business, however without knowing that you are different then the lender will assume the worst.
By having a basic grasp of what the lender is looking at then you can start to build your understanding and be in a position to explain things upfront remembering that a lender will seldom seek clarification from you, if you don’t get your message across correctly at the outset then you risk seeing your application fail.
If you need any help or the above generates any questions then please get in touch.