How does business cash flow affect loan approval?

Cash flow is the single most important factor most business lenders evaluate. Lenders want to see that your business generates sufficient cash to service the new debt payment plus all existing obligations. The global debt service coverage ratio compares total business income (and sometimes owner's personal income) to all business and personal debt payments. A DSCR of 1.25 or higher is typically required. Lenders calculate cash flow from your tax returns using an add-back analysis (adding back depreciation, amortization, owner's salary, one-time expenses). Inconsistent cash flow or declining revenue is a major red flag. Strong, growing, and consistent cash flow is the best qualification asset a business can have.