When evaluating a company’s ability to repay debt, a bank typically evaluates the company’s debt-coverage ratio. This ratio divides the company’s net cash flow from operations by the total debt payments (principle plus interest) to determine the number of times operating cash flow can service or repay the debt. In equation form: (Earnings before Interest, [...]
Tags: Buying a Business
Lenders typically look for multiple sources of repayment to satisfy any business loan. These sources may range from the cash flow of the business, to the liquidation value of the fixed assets, additional sources of revenue to the buyer not attributable to the business and personal guarantees from the buyer and the buyer’s spouse. [...]
Tags: Buying a Business