How would you initially know whether you qualify for a business loan?
First, you must know the Depth of Service Coverage Ratio (DSCR).
The Depth of Service Coverage Ratio (DSCR) is a vital sign for all business owners and small to medium businesses who want to prequalify for a business loan.
A Human body has an average blood pressure level of 120/80. Anything beyond or below is not a good indicator of our body. Financial background is essential when you are applying for a loan from a bank. The bank frequently asks questions about your profit and loss for the past year. And your current profit and loss statements are also required. They will ask for your tax return for the past two or three years of your financial reports because they will identify your debt service coverage ratio. The debt service coverage ratio is your earnings before income tax depreciation and amortization divided by the annual debt payment. It’s very technical, so to make it simple, for example, a nurse practitioner. You made $100.000.00 before income tax; the depreciation and amortization divided by $100.000.00 on your annual debt payment of $50,000.00. Suppose you have a yearly fee of $50,000.00. The $100.000.00 issue earnings divided by $50,000.00 gives you the depth of service coverage ratio. Then what does it tell you? If you have one and more ratios like 1.25 or 1.75, you are in a better position for a business loan. Anything above one is a good ratio for a business loan. Anything below one for the percentage is not good; you are poorly performing, and your debt is so high from your income. Again, the bank, the lender, and the SBA will always look at your financial statements.
To grow your business by increasing the funding source, your financial information, profit and loss, balance sheet, and cash flow should always be up to date, enabling you to apply and qualify for this business loan.
We are providing the bundle service, the tax, and the bookkeeping service together to go hand in hand when you start to work with the lender. You must click the link below for a 30-minute complimentary consultation if you want us to provide that service.
Again, I’m Christopher Wycoco, entrepreneur, IRS Agent, and founder of WYCOTAX, which provides a virtual outsourcing tax, payroll, and bookkeeping service solution. What are you waiting for? Contact us on our social media platform, website, or comment below. Here in WYCOTAX, you deserve the Max!!! Stay safe.
