Lending Criteria for Start-Up or Purchased Business

Key Factors in Granting Credit:

Cash flow or debt service coverage
Depends on industry; however, a typical minimum debt service coverage is 1.2x. Debt service coverage calculation being defined as (Earnings before Interest, Depreciation & Amortization less Distributions) divided by (Annual Principal + Interest).

Sources of repayment
Credit history (business and personal on the owners)
Feasibility of project
Owner's equity position in project (General rule: 20% down payment or equity is required)
Required Financial Information - Start-Up Business

Personal financial statements of all owners who own 20% or more of the business
Last 3 years of federal tax returns for owners
A Business Plan that includes:
1. Description of product or service

2. Ownership information, resumes, and responsibilities

3. Market analysis, including competition

4. Contingency plans

5. Loan request and uses of monies

6. Beginning balance sheet, reflecting owner's equity in business

7. Projected cash flow for 2 years, first year should reflect month-to-month

Required Financial Information - Purchased Business

Last 3 years of federal tax returns of the business
Year to Date balance sheet and income statement for business
Recent Account Receivable & payable agings (if applicable)
Inventory listing (if applicable)
Personal financial statements of all owners who will own 20% or more of the business
Last 3 years of federal tax returns for owners
Business Plan
Projected cash flow for two years