Even with stimulus packages and banking bail-outs, it remains tough for small business to get the financing they need to stay afloat.

If you’re considering seeking financing for your small business, be sure to meet with a professional accountant before you begin the process. An outsource CPA, especially an outsource small business accountant, will help you gather the data you need to apply for financing with confidence.

Here are a few of the details and definitions you’ll need to know throughout the process.

• Loan amount – This is the total amount of your loan, the amount you borrow.
• Amortization – Payment period in years.
• Interest rate – Annual interest rate for your specific loan. Your interest is calculated monthly on the current outstanding balance of your loan at 1/12 of the annual rate.
• New monthly payment – Monthly payment for this loan.
• Annual verifiable net income – You’ll need to provide evidence that you make as much as you say you do. Your annual net income must be verified (proven) based on your IRS tax returns or other financial statements.
• Annual depreciation expense - Since depreciation reduces your net income (but not your cash flow), we add back depreciation in calculating your total net cash income.
• Other non-cash charges – Like depreciation, these are your other non-cash charges to your net income that should be added back to calculate your total net cash income for the year.
• Real estate mortgage – This is your monthly payment for any real estate mortgages for property you may own.
• Business line(s) of credit – Banks want to see your monthly payment for any business lines of credit. Lines of credit can come from banks, credit unions, suppliers, etc.
• Auto loans – Your monthly payment for any auto loans (or leases).
• Credit cards – Your monthly payment for any credit cards.
• Other loans – Your monthly payment for any other outstanding loans.
• Monthly debt payments eliminated – If you’re planning to use the money to bundle any of your older debts, the bank will want to know the amount of the monthly obligations (listed above) that will be paid off by the new loan.
• Debt Service Coverage (DSC) – The Debt Service Coverage (DSC) is determined by dividing the total annual net cash income by the total annual debt service. This is where the “rubber meets the road” when it comes to getting a loan. If you have a DSC of 1.25 or higher, there is a good chance that you will be approved for your loan.

 If you fail to get the financing you require, be sure to ask the loan officer for specifics about how the bank came to that conclusion. Then work with Dashboard Accounting as your small business accountant to make the changes necessary to put you on more stable financial footing. With Dashboard Accounting, you’ll find out how to be in a better position to get the loan you want on your next request.