Does Cash Flow Affect My Business Loan Application?

ByGeraldine R. Pleasant

May 1, 2022 #"Business Insurance Cover Coronavirus, #5e Business Profit, #Ahron Levy Columbia Business School, #Business Consultant Certification Austin, #Business Letter With Logo Example, #Business Located Easy Location, #Business Platform Stocks, #Business Positions Seattle, #Business Regulation Legal Services, #Daystarr For Business, #Dimagi Business Development Toolkit, #Do Business Schools Accept Entreprenuers, #Enironmentall Friendly Business Ideas, #Eric Early Republican Business Owner, #Essec Business School Dean, #Essential Business To Remain Open, #Example Small Business, #Fall Winter Business Hours Template, #Fdot Woman Owned Business Certification, #First Business Women United States, #First Com Business, #Fixing A Damaged Reputation Business, #Florida Business Enforcement, #Free Small Business Communication Tool, #Law School Business Entity Outlines, #Mapping A Business Location, #Medical Business Trends Economics, #Mix Business And Personal Money, #Mlm Nit Small Business Legally, #New Business Agency Sales Questions, #Patricia Saiki Women'S Business 1990, #S Corp Business Deductions, #Safety Business Proposal, #Sample Business Plan Entrepreneur, #School Business Administration Positions, #Search Tx Business Llc, #Sentextsolutions Business Cards, #Signs For Business On Roads, #Skype For Business Recording Capacity", #Small Business Forums .Net, #Small Business Insurancr, #Tech Monkey Business, #Ttu Business Cards Template, #Turbotax Business Nys Forms, #Uf Business School General Studies, #What Business Hours Macgaffin Bar, #Yelp Business .Json, #Yelp Tax Attorney Small Business, #Your Business Department, #Zeus Panda Business Moel

Does Cash Flow Affect My Business Loan Application?

When you apply for small business funding, lenders take a variety of factors into consideration before making a decision. Details such as your credit score, time in business and revenue are important, but what you may not have considered is your business’s cash flow. Read our quick guide to learn more about cash flow and how it can impact a small business loan application. 

 

What Is Cash Flow?

Cash flow is defined as the net amount of money transferred into and out of a company over a set time period. A positive cash flow indicates that more money is moving into the company than out of it, whereas a negative cash flow means that the business is spending more cash than it generates in revenue. Read this guide to learn how to calculate cash flow and access free cash flow statement templates.

 

How Does Cash Flow Affect My Loan Application? 

Small business lenders typically ask for bank statements and other financial data to determine whether you have positive cash flow and can afford to take out the loan. If you have a history of positive cash flow, you’re more likely to be approved than if you have negative cash flow. Although it’s not the only financial factor that small business lenders review, improving your cash flow can help your chances of getting approved for a small business loan. 

 

How Can I Improve My Business’s Cash Flow? 

Many business activities and financial matters can impact your business’s cash flow, including unpaid invoices, unforeseen expenses, low revenue and spending habits. Performing thorough financial reviews periodically can help you determine and address the root cause of any cash flow issues. Additionally, the following strategies can help you recover from negative cash flow:   

  • Trim your expenses: Aim to limit nonurgent business expenses, particularly if you’re experiencing a cash flow lull or slow season.  
  • Run a sale or promotion: Although this tactic may not work for all businesses, you can help eliminate older products and improve sales with a clearance sale or promotion. 
  • Tighten up net payment terms: If you send invoices to customers, consider reconfiguring your payment terms or incentivizing early payments to avoid unpaid or late bills. 

 

About Bonnie P

Bonnie is a Chicago transplant who’s committed to seeing the world on a dime. As an avid news junkie with a fascination with finance, she loves to help others do more with less.