Lenders scrutinize your debt-to-income, current ratio, and profit margins. Here is what each number means and how to move them in your favor.
Before a lender makes a lending decision, they run your financials through a set of standard ratios. Understanding these metrics — and knowing how to move them — puts you in the driver's seat rather than at the mercy of an underwriter's black box.
1. Debt-to-Income Ratio (DTI)
DTI measures total monthly debt payments (including the proposed new loan) divided by gross monthly income. For business loans, lenders typically want a global DTI (personal + business) below 45%. If you are above this, paying down existing personal debt or increasing documented business revenue are the two levers.
2. Current Ratio
Current Ratio = Current Assets ÷ Current Liabilities. This measures your business's ability to pay short-term obligations. A ratio above 1.5 is generally considered healthy. Below 1.0 signals potential cash flow stress and will concern most lenders significantly.
3. Profit Margin
Both gross margin and net margin matter. Lenders want to see that your business is not just generating revenue but actually keeping a meaningful portion of it. A net profit margin above 10% signals a healthy, sustainable operation.
- Debt Service Coverage (DSCR): NOI ÷ total debt service, want 1.25+
- Quick Ratio: (Cash + Receivables) ÷ Current Liabilities, want 1.0+
- Asset Turnover: Revenue ÷ Total Assets, higher is more efficient
Lender Insight: Lenders average the last 2–3 years of your financials, then weight the most recent year more heavily. A strong most-recent-year can overcome weaker prior years.
Ready to find the right funding for your business?
Get matched with lenders in minutes. No hard credit pull to start.
Get My Loan Offers