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The Three Ratios
September 27th, 2009 by admin
To learn more about commercial loans it is important to learn about the three ratios that most lenders use to determine whether or not they will loan the money to the business. The first ratio that lenders look at is debt coverage ratio. This is basically how much income the business is producing compared to the debt service. The second ratio looked at by lenders is known as the loan to value ratio. This is determined by the total loan balances divided by the market value. The third and final ratio is the debt ratio. This is monthly expenses divided by the gross monthly income. Some lenders may also require you to provide your own debt ration.
