You want a loan.
You need to prepare.
You need a checklist.
You need lender-ready metrics.
Financial foundation checklist. Loan preparation. Lender metrics. Your readiness.
This guide shows you how.
Checklist. Preparation. Metrics. Your foundation.
Read this. Complete checklist. Get loan-ready.
Key Takeaways
- Calculate liquidity ratios—use Current Ratio and Working Capital Calculators to show you can cover short-term obligations
- Calculate leverage ratios—use Debt-to-Equity and DSCR Calculators to show manageable debt levels
- Calculate profitability—use Profit Margin Calculator to show sustainable profitability
- Calculate cash flow—use Cash Flow Forecast Calculator to show predictable cash flow
- Complete all metrics—lenders review all ratios together, not just one metric
Table of Contents
Why Checklist Matters
Checklist ensures readiness.
What happens without checklist:
- Loan applications are rejected
- Missing metrics are discovered late
- Time is wasted
- Opportunities are lost
What happens with checklist:
- Loan applications are prepared
- All metrics are calculated
- Time is used efficiently
- Opportunities are captured
The reality: Checklist enables success.
Liquidity Metrics
Calculate liquidity metrics:
Current Ratio
Calculate it:
- Use our Current Ratio Calculator
- Enter current assets and current liabilities
- See liquidity ratio
Why it matters: Lenders want to see liquidity above 1.0, preferably 1.5 or higher.
Working Capital
Calculate it:
- Use our Working Capital Calculator
- Enter current assets and current liabilities
- See available cash
Why it matters: Lenders want positive working capital.
Pro tip: Calculate liquidity. Current ratio, working capital. Use our calculators for accurate calculation. See our financial health checkup guide for comprehensive assessment.
Leverage Metrics
Calculate leverage metrics:
Debt-to-Equity Ratio
Calculate it:
- Use our Debt-to-Equity Ratio Calculator
- Enter total debt and total equity
- See leverage ratio
Why it matters: Lenders want reasonable debt-to-equity ratios for your industry.
Debt Service Coverage Ratio
Calculate it:
- Use our Debt Service Coverage Ratio Calculator
- Enter operating income and debt service
- See payment capacity
Why it matters: Lenders want DSCR above 1.25, preferably 1.5 or higher.
Pro tip: Calculate leverage. Debt-to-equity, DSCR. Use our calculators for accurate calculation. See our debt health assessment guide for evaluation.
Profitability Metrics
Calculate profitability metrics:
Profit Margin
Calculate it:
- Use our Profit Margin Calculator
- Enter revenue and expenses
- See profit margin
Why it matters: Lenders want to see positive and sustainable profit margins.
Profitability Trends
What trends to show:
- Improving margins over time
- Consistent profitability
- Positive trajectory
- Industry-appropriate margins
Why it matters: Trends show sustainability.
Pro tip: Calculate profitability. Profit margin, profitability trends. Use our Profit Margin Calculator for calculation.
Cash Flow Metrics
Calculate cash flow metrics:
Cash Flow Forecast
Calculate it:
- Use our Cash Flow Forecast Calculator
- Enter cash inflows and outflows
- See projected cash positions
Why it matters: Lenders want to see predictable and positive cash flow.
Cash Runway
Calculate it:
- Use our Cash Runway Calculator
- Enter cash and burn rate
- See time remaining
Why it matters: Lenders want adequate runway to service debt.
Pro tip: Calculate cash flow. Forecast, runway. Use our calculators for accurate calculation. See our cash flow safety net guide for planning.
Checklist Completion
Complete your checklist:
Calculate All Metrics
What to calculate:
- Current ratio
- Working capital
- Debt-to-equity ratio
- DSCR
- Profit margin
- Cash flow forecast
- Cash runway
Why it matters: All metrics are needed.
Document Results
What to document:
- All calculated ratios
- Supporting financial statements
- Trend analysis
- Industry comparisons
Why it matters: Documentation supports application.
Address Weaknesses
What to address:
- Metrics below lender thresholds
- Declining trends
- Industry outliers
- Red flags
Why it matters: Addressing weaknesses improves approval chances.
Pro tip: Complete checklist. Calculate all metrics, document results, address weaknesses. See our bank criteria guide for lender perspective.
Your Next Steps
Calculate metrics. Complete checklist. Prepare for loan.
This Week:
- Review this guide
- Calculate all liquidity metrics
- Calculate all leverage metrics
- Calculate profitability metrics
This Month:
- Calculate cash flow metrics
- Document all results
- Address any weaknesses
- Prepare loan application
Going Forward:
- Monitor metrics regularly
- Maintain strong foundation
- Update documentation
- Stay loan-ready
Need help? Check out our Current Ratio Calculator for liquidity, our Working Capital Calculator for cash position, our Debt-to-Equity Ratio Calculator for leverage, our Debt Service Coverage Ratio Calculator for payment capacity, our Profit Margin Calculator for profitability, our Cash Flow Forecast Calculator for cash flow, and our bank criteria guide for lender perspective.
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FAQs - Frequently Asked Questions About Financial Foundation Checklist: The Must-Have Metrics Before You Ask for a Loan
What current ratio do lenders want to see before approving a business loan?
Lenders typically want a current ratio above 1.0, with 1.5 or higher preferred, showing your business can comfortably cover short-term obligations.
Learn More...
The current ratio (current assets divided by current liabilities) measures your ability to pay short-term debts—a ratio below 1.0 means liabilities exceed assets, which is a red flag.
A ratio of 1.5 or higher signals to lenders that you have a comfortable cushion of liquid assets beyond what's needed for immediate obligations.
Calculate your current ratio before applying, and if it's below the threshold, work to increase current assets or reduce current liabilities before submitting your application.
Why do lenders look at the Debt Service Coverage Ratio, and what DSCR is considered acceptable?
DSCR measures whether your operating income can cover debt payments—lenders want a DSCR above 1.25, preferably 1.5 or higher.
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The Debt Service Coverage Ratio divides your net operating income by your total debt service obligations, showing how many times over you can cover your payments.
A DSCR of 1.0 means you barely cover payments with no margin for error, which is too risky for most lenders.
A DSCR of 1.25 provides a 25% cushion above required payments, while 1.5 or higher gives lenders strong confidence in your repayment ability.
If your DSCR is low, you can improve it by increasing operating income, reducing debt service through refinancing, or paying down existing obligations.
What five categories of financial metrics should be ready before applying for a loan?
Prepare liquidity metrics (current ratio, working capital), leverage metrics (debt-to-equity, DSCR), profitability metrics (profit margin, trends), and cash flow metrics (forecast, runway).
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Liquidity metrics—current ratio and working capital—show lenders you can meet short-term obligations and have cash available for operations.
Leverage metrics—debt-to-equity ratio and DSCR—show your existing debt is manageable and you can handle additional borrowing.
Profitability metrics—profit margin and trend analysis—demonstrate your business generates sustainable profits with a positive trajectory.
Cash flow metrics—forecast and runway calculations—prove you have predictable cash flow and sufficient runway to service the new debt.
Lenders review all these ratios together as a complete picture—being strong in only one area isn't enough if others show weakness.
How does positive working capital affect your loan application?
Positive working capital shows lenders your current assets exceed current liabilities, meaning you have a cash cushion for daily operations and can absorb the new debt obligation.
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Working capital (current assets minus current liabilities) represents the money available for day-to-day operations after covering immediate obligations.
Lenders view positive working capital as a sign of operational stability—it means you're not relying on borrowed money just to keep the lights on.
Negative working capital is a critical red flag that often leads to automatic loan rejection because it signals immediate cash flow problems.
Before applying, calculate your working capital and improve it if needed by speeding up collections, reducing payables, or building cash reserves.
What should you do if your financial metrics fall below lender thresholds?
Identify which metrics are weak, implement targeted fix strategies for each, track improvements over time, and delay your loan application until metrics reach acceptable levels.
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First, calculate all key metrics and compare them to typical lender thresholds to identify exactly where your weaknesses lie.
For low liquidity, increase current assets through better collections or reduce current liabilities by paying down short-term debt.
For high leverage, pay down existing debt, increase equity through retained earnings, or refinance to improve terms.
For low profitability, increase prices, reduce costs, improve operational efficiency, or review your business model.
Document your improvement trends—lenders value a positive trajectory, so showing consistent improvement over several months strengthens your application even if metrics aren't yet ideal.
Why is showing profitability trends more important than a single profit margin snapshot?
Trends demonstrate sustainability and direction—improving margins show a business getting stronger, while a single good quarter could be an anomaly.
Learn More...
Lenders want to see that your profitability is consistent and improving, not just a one-time result that might not repeat.
Showing several months or quarters of improving margins demonstrates that your business is on an upward trajectory and can sustain loan repayment over time.
Industry-appropriate margins provide additional context—a 5% margin in retail is healthy, while the same margin in professional services would raise concerns.
Prepare trend analysis with supporting financial statements to give lenders confidence in your long-term earning capacity.
Sources & Additional Information
This guide provides general information about financial foundation checklists for loan preparation. Your specific situation may require different considerations.
For current ratio calculation, see our Current Ratio Calculator.
For working capital calculation, see our Working Capital Calculator.
For debt-to-equity calculation, see our Debt-to-Equity Ratio Calculator.
For DSCR calculation, see our Debt Service Coverage Ratio Calculator.
For profit margin calculation, see our Profit Margin Calculator.
For cash flow forecasting, see our Cash Flow Forecast Calculator.
Consult with professionals for advice specific to your situation.
